If you’re wanting to dissolve a California business entity, such as a limited liability company or corporation, you may want to do that right away.

If the entity is dissolved before March 15, and if it has not conducted business in this calendar year, the $800 annual minimum franchise tax for 2011 will not be due, in most circumstances. If you wait until after the 15th, you’ll very likely have to pay $800 for the year.

We can file your Certificate of Cancellation/Dissolution at the counter in Sacramento in the next few days and get you in under the deadline. Begin the process of dissolution by filling out the appropriate form here.

It may take the California Secretary of State’s office weeks or months to process the dissolution paperwork, but the dissolution will be effective on the day they received the filing. This is why you cannot mail it in: you must file it with a courier service, at the counter for hand date-stamping.

Share on Facebook

As the end of the year approaches, one very important question is on the minds of many our clients:

Should we dissolve our unused corporation or LLC, or face another year of taxes?

The end of a relationship can involve a mixture of emotions – pain, happiness, relief. The ending of a business is much the same especially when your business is often one of the most intimate relationships in your life.

As with so many partings, you and your business need closure. As far as the law is concerned, that will likely include the filing a certificate of dissolution for corporations and a certificate of cancellation of LLCs, and perhaps other steps for your situation, including shareholder. board, or member approval.

On its face, that seems easy enough – find the right business forms on the Secretary of State’s website, fill it out, send it in. In fact, there aren’t even fees unless you need a rush processing. Or use Formation Solutions to assist in this matter: California for-profit corporation dissolution, LLC dissolution

But read carefully. Every form has conditions. The state wants to know things have ended responsibly.

In order to wind-up your corporation, you’ll need to have a few things done.

1. Your corporation’s debts need to be provided for – either completely paid, arranged to be paid or paid to the maximum extent of which the corporation is capable.
2. Any assets must be divided up equitably among the shareholders.
3. The corporation must file a final return with the California Franchise Tax Board.

You must also report how it was determined to dissolve the corporation – whether by unanimous vote of the shareholders, or by partial vote. If it was by a vote of less than 100 percent, you will need to file a Certificate of Election to Wind-Up and Dissolve along with your Certificate of Dissolution.

LLCs face similar requirements. In order to make your way through a Certificate of Cancellation, you’ll need to have several issues resolved.

1. Your LLC will need to distribute assets and any profits to its members.
2. The company will need to have its debts paid or arranged to be paid.
3. A final tax-return must be filed with the California Franchise Tax-Board or you must certify that it will be done.

Again, if the ending of the LLC wasn’t done my unanimous vote of the members, you’ll need to complete a supplementary Certificate of Dissolution to explain the circumstances surrounding the cancellation. The form requests any supplementary proof you have of an honest, correct dissolution vote.

With both corporations and LLCs, if a company never had assets or the entity was never actually used to conduct business, the dissolution forms become simple and easy. In activity of a significant length of time provides a similar benefit.

The main thing is to keep good records – especially of ownership votes to dissolve and your wind-up accounting.

Although situations may vary, many believe that completing the legal dissolution process is an important step to protect yourself. Please consult with an attorney on such matters. If it’s daunting or there are complicated circumstances surrounding your dissolution – get a qualified business attorney to assist you and guide you through the process.

Share on Facebook

Nothing feels worse than paying more than you have to because of your own actions. With all things you manage to drive your business, it can be challenging to keep track of legalities that may seem fairly boring or unimportant by comparison.

The only problem – they aren’t so unimportant.

Forgetting important filings and renewals can cost you a lot in late fees and penalties. The first step is maintaining a list of the things you need to track.

1. Statement of Information. California requires every corporation and LLC to file a Statement of Information with the Secretary of State. For-profit corporations need to file annually based on your date of formation while LLCs and non-profits can file biennially. You’ll only part with $25 if you get your Statement in on time. Once your company becomes delinquent, expect a hefty $250 penalty fee to get everything straightened out. Most other states have a similar filing requirement.

2. Tax Returns. No one should be surprised that the IRS and the California Franchise Tax Board want to hear from you at least annually and on-time. You can ask for extensions if necessary – but you need to communicate. If you owe money and you file late, expect late penalties. If you file and pay taxes quarterly based on expected earnings – then you need to be extra careful to track your taxes. If you file annually, note the ending of your business’ tax-year and make sure to file within four months of your tax-year ending.

3. State Licenses. If your business receives special licenses or permits from the state, keep track of the expiration date. Expirations can have no rhyme or reason other than they are the anniversary of the date the state initially processed your license. The consequences of operating without a valid license can be steep and severe – especially if your business is in a field like healthcare, gas stations, insurance, or finance.

4. Local Licenses. They may not seem like much – just a certificate that you might post on the wall somewhere in your office – but local business licenses are still an important legality. Again, these licenses are usually renewable on the anniversary of their initial issuance. You need to note this down and keep track. More importantly, if you operate a business that is specifically regulated by your county or city such as restaurants, then you can face expensive penalties or even forced closure if you don’t keep up on regulations.

As an example, the City of Los Angeles is known for tracking down companies that have not filed for their city business tax certificate, and imposing heavy fines and interest.

5. Federal Regulatory Fees and Permits. If you are a business lucky enough to fall under federal supervision, then you probably need no reminder of the importance of compliance. Keep careful track of your filings and fees. Companies which deal in securities should make SEC and FINRA compliance a top issue just as construction companies that deal with environmental issues need to keep up with permits and fees to the EPA.

In all of these situations – the key is to create deadlines and markers in your calendar – even if you have someone your rely on to deal with these tasks for you. Someone else’s negligence or mistake could cost you financially or even cost you your business.

Best Practice: mark down renewal fee and filing reminders two months in advance of their deadlines. Handle it early. Check in with your accountant, attorney, assistant or whoever you have helping you with these matters as soon as you see that reminder in your calendar.

While many, if not most government agencies will send you reminder notices or forms, you can’t rely on them – and they will hold you accountable either way.

Share on Facebook

The California Secretary of State has issued another warning regarding misleading solicitations.

The Secretary of State’s office has been advised that letters are being sent to California corporations directing them to submit $495 and a completed form to a private company named “Business Filings Division” in order to dissolve their business entity.  A similar letter is being sent to California limited liability companies.

The letter/form does not meet the requirements of the California Corporations Code, and a corporation cannot delegate the obligation to have the Certificate of Election to Wind Up and Dissolve and the Certificate of Dissolution signed and verified by the shareholders, members, officers or directors of the corporation.

Additionally, the Certificate of Election to Wind Up and Dissolve and the Certificate of Dissolution must be submitted to the California Secretary of State’s office for filing.

If you receive one of these fraudulent solicitations, please let us know.

Also, you can mail a written complaint along with the entire solicitation (including the solicitation letter, the outer and return envelopes, and all related documents) to the California Attorney General’s office, Public Inquiry Unit, P.O. Box 944255, Sacramento, California 94244-2550.

A complaint form, which can be completed online and printed to mail, is available on the California Attorney General’s website at www.ag.ca.gov/consumers/general.php.

Share on Facebook

“Compliance” can mean many things. This article is about what filings are required by the California Secretary of State. In other posts, we’ll be writing about corporate minutes and such.

What is due to the Sec. of State, when, and how much does it cost?

California law requires corporations and limited liability companies to update their records with the Secretary of State’s office on an annual basis.

This filing is called the Annual Statement of Information.

It is due once a year, unless you make other changes, such as your company’s business address, and the filing fee is $25.

BUT, if you miss the filing due date, the Secretary of State tacks on another $250 late fee.

We recently polled a large sampling of our clients and found that nearly half of them had missed the filing due date for the Annual Statement of Information. For them, the $25 fee turned into $275.

We want to make sure this never happens to any of our clients.

So then, let’s lay out the requirements:

Q: What is the purpose of the Annual Statement of Information?
A: It lets the Secretary of State know if you’ve changed owners, executives, company address, or your agent for service of process. The forms are a little different for corporations and LLC’s, but they are generally the same.

Q:  When is it due?
A:  It is due annually, any time in the five calendar months preceeding the anniversary of your entity formation.

For example, if your corporation or LLC formed on November 20, then you must file the Statement of Information each year, at some point in July, August, September, October, or November, but no later than 11/20.

Q:  What does it cost?
A:  As mentioned above, the filing fee is $25. Miss the date, though, and you’ll be hit with the additional fine of $250.

Q:  Don’t we also need to file Annual Minutes with the Secretary of State?
A:  No, not in California. Minutes (both annually and sometimes more frequently) are to be kept by the corporation or LLC. These are your internal records. You are not required to file them with the California Secretary of State. (Some states differ slightly in this regard, but that’s for another blog post.)

Q:  Seriously, we got a letter in the mail that said we need to file annual minutes. Are you sure?
A:  As we’ve discussed, there are private companies that sell corporate compliance services. Several have been known to be very agressive with their marketing, going so far as to send very official looking letters.

These companies offer a service that will generate Annual Minutes for you. This service may be an excellent service, but many of our clients have complained that the confusion comes from the letters’ (somewhat intimidating) suggestion that these minutes need to be filed to avoid fines. This just isn’t the case. There certainly are very important reasons to regularly update your minutes, but this is not one of them.

The Secretary of State has even issued a public warning memo, calling them “Misleading Business Solicitations.”

If you have any other questions about the Annual Statement of Information, please Contact Us. We’ll do our best to answer your questions or sort out whatever situation you may have.

Share on Facebook

Many of our clients have asked about a very official looking letter in their mailbox, warning of the importance of making certain compliance filings, and requesting a fee for submission. These letters are from a private company and can be rather misleading.

It seems the California Secretary of State agrees that they are misleading. They were concerned enough to issue a formal notice recently titled “Customer Alert Regarding Misleading Solicitations.”

The warning lays out some of the characteristics of these letters:

Appear similar to a Secretary of State Statement of Information form;

Contain an official-looking seal;

Quote a specific statute or other law on the form to be filled out and returned;

Imply that failing to return the form and pay the requested fee may place the entity in legal jeopardy, or might cause the entity’s filings with the California Secretary of State to be in default or noncompliant status;

Contain a reference to a “file number,” “Corp Number,” “Corporation Number,” or “Control Number” that does not match the number assigned to the entity by the California Secretary of State;

Reference or quote Corporations Code sections inapplicable to the type of entity being solicited, such as Code sections applicable to corporations when soliciting a limited liability company;

Reference an “annual fee” or “annual payment” rather than a filing fee and that is in excess of the filing fee for a Statement of Information;

Provide an estimated processing time for “minutes” to be prepared and mailed to the entity;

Indicate the submitted information will be treated as private and confidential.

So, let’s be very clear: The Secretary of State is not related to these private companies. You do not need to make filings through such a business.

That said, there are annual requirements, such as the filing of the Statement of Information, for both corporations and limited liability companies. You do not want to miss the deadline on this: if you do not file it by the annual due date, the $25 filing fee gets hit with a $250 late fee.

If you have any questions about what is required and how to file it, please contact us. We’d be happy to answer your questions.

UPDATE: here is a description of complaints on the issue from the LA Better Business Bureau: Corporate Compliance Recorder

Share on Facebook