What if I want to dissolve a corporation that has shareholders I can't locate?

You may qualify for court-supervised dissolution under Corporations Code Sections 1800-1806. Alternatively, if you've made reasonable efforts to contact missing shareholders and have a majority of shares, you may proceed. Remaining assets for missing shareholders must be reported to the State Controller's Unclaimed Property Division.

How to Dissolve a California Corporation: Complete FTB + SOS Guide

Q: What happens if I just stop filing tax returns and let the corporation go suspended?

The FTB will suspend your corporate powers, but suspension doesn't end the corporation's existence or stop the $800 annual minimum franchise tax from accruing. The tax continues year after year, along with penalties and interest. After enough years, the accumulated debt can reach tens of thousands of dollars. The correct approach is to formally dissolve.

Q: Can shareholders be held liable for corporate debts after dissolution?

Generally no, if dissolution was conducted properly. However, exceptions include: distributions to shareholders before paying creditors, fraudulent statements in dissolution certificates, corporate veil piercing due to commingling or undercapitalization, and personal guarantees of corporate debts which survive dissolution.

Q: Can a dissolved corporation be revived?

Yes, but the process is complex and must occur within five years of dissolution under Corporations Code Section 2010. Revival requires court approval and a showing of good cause, such as discovering assets that should have been distributed or addressing litigation that arose after dissolution.

Q: How do I close bank accounts when dissolving a California corporation?

Close corporate bank accounts during the winding-up phase (Step 4), after paying all creditors and distributing assets but before filing the Certificate of Dissolution. Bring board resolution authorizing closure, your dissolution vote documentation, and government-issued ID. Keep records of final account statements for at least 7 years.

Published: November 15, 2025 | Updated: February 2026 | Incorporation

Closing a California corporation isn't as simple as locking the doors and walking away. Whether you're shutting down a failed startup, consolidating business entities, or moving operations out of state, you need to understand both the corporate law mechanics and the tax implications. Get it wrong, and you could face ongoing $800 annual minimum franchise tax obligations, personal liability for unpaid debts, or enforcement actions from creditors.

This guide walks through the complete process of dissolving a California stock corporation, with particular emphasis on the critical steps needed to stop the annual $800 minimum franchise tax from continuing indefinitely. I've handled hundreds of these transactions over 13 years of practice, and the most common mistake I see is business owners who think they've closed their company when they haven't properly completed the dissolution with both the Secretary of State and the Franchise Tax Board.

If you're dissolving a California LLC instead, the process differs significantly. This article focuses exclusively on California domestic stock corporations (including S corporations, which are corporations for state law purposes). For professional corporations, close corporations, or nonprofit corporations, see the special rules section below.

Understanding Dissolution vs. Winding Up: What Actually Happens

Many business owners use "dissolve" and "wind up" interchangeably, but California law treats these as distinct phases. Understanding the difference matters because your corporation continues to exist and incur obligations during the winding-up period, even after you've decided to dissolve.

The Election to Wind Up and Dissolve

The process starts when your board of directors and shareholders vote to dissolve the corporation. Under Corporations Code Section 1900, this requires approval by both the board and the shareholders holding a majority of the outstanding shares (or whatever higher threshold your bylaws specify). This vote creates what the statute calls an "election to wind up and dissolve."

Once this election is made, Corporations Code Section 1901 requires the corporation to cease carrying on business except as necessary for winding up. You can't just continue operating as normal while casually winding down. The corporation must actively work toward completing the dissolution.

There's an important exception to the standard approval process: if your corporation never issued shares or never commenced business, the board can dissolve without shareholder approval under Section 1900.5. This "short form" dissolution process is simpler and allows you to skip straight to filing the dissolution certificate without the election certificate.

What Winding Up Actually Involves

Winding up means systematically closing out the corporation's affairs. This includes collecting accounts receivable, selling assets, paying or providing for all debts and obligations, dealing with pending litigation, filing final tax returns, and distributing remaining assets to shareholders. Under Section 2010, the corporation continues to exist for these purposes even after dissolution.

The survival-after-dissolution rule in Section 2010 is crucial. It means your corporation can still sue or be sued, hold property, and conduct business transactions necessary to wind up its affairs. However, it cannot start new business ventures or continue operating in its original capacity. Think of it as being on life support while you settle final accounts, not as permission to keep doing business.

This period can last weeks, months, or even years depending on the complexity of your affairs. I've seen simple corporations with no assets or liabilities complete winding up in a few weeks, while corporations with real estate holdings, ongoing litigation, or complex contractual obligations take years to fully wind up.

The Legal Framework: Key Statutes You Need to Know

California's dissolution process is governed primarily by Corporations Code Chapter 19 (Sections 1900-1907) for the dissolution election and procedures, and Chapter 20 (Sections 2010-2011) for post-dissolution survival and winding up. These statutes lay out specific requirements that must be satisfied before you can file dissolution documents.

Certificate of Election to Wind Up and Dissolve (Form ELEC STK)

Section 1902 requires most corporations to file a Certificate of Election to Wind Up and Dissolve (Form ELEC STK) with the Secretary of State after the shareholders vote to dissolve. This certificate formally notifies the state and the public that your corporation has elected to dissolve and is in the process of winding up.

However, you can skip this filing in two situations. First, if 100% of your shareholders approved the dissolution and you include a statement to that effect in your dissolution certificate, you don't need a separate election certificate. Second, if you qualify for short-form dissolution under Section 1900.5, you can proceed directly to filing the dissolution certificate.

The election certificate doesn't actually dissolve the corporation. It simply starts the clock and gives public notice that dissolution is underway. The actual dissolution occurs when you file the Certificate of Dissolution.

Certificate of Dissolution: The Critical Filing (Form DISS STK)

Section 1905 specifies exactly what must be in your Certificate of Dissolution (Form DISS STK). This is where many dissolution attempts fail, because the statute requires you to make specific factual statements under penalty of perjury. You cannot file the dissolution certificate until these statements are actually true.

The required statements include: (1) that the election to wind up and dissolve was made by the required vote; (2) that all known debts, liabilities, and obligations of the corporation have been paid or adequately provided for; (3) that all known assets have been distributed or adequate provision has been made for distribution; (4) that no actions are pending against the corporation or adequate provision has been made for them; and (5) that the final franchise tax return has been or will be filed with the Franchise Tax Board.

These aren't mere formalities. By signing the dissolution certificate, you're certifying under penalty of perjury that these statements are true. If you lie and creditors come looking for money later, you could face personal liability. This is why proper winding up before filing is so important.

The Step-by-Step Dissolution Process

Here's how to properly dissolve a California corporation from start to finish. Following these steps in order will help you avoid the most common pitfalls.

Step 1: Check for Suspensions and Forfeitures

Before you can dissolve, your corporation must be in good standing with the Franchise Tax Board. If your corporate powers have been suspended or forfeited for failure to file tax returns or pay taxes, you must revive the corporation first. The Secretary of State will reject your dissolution filing if you're suspended or forfeited.

Check your corporate status on the Secretary of State's business search website. If you see "suspended" or "forfeited" status, you'll need to file all delinquent tax returns and pay all outstanding taxes, penalties, and interest before the FTB will issue a certificate to revive. Only after revival can you proceed with dissolution.

Step 2: Board Resolution and Shareholder Vote

Once you've confirmed good standing status, your board must adopt a resolution recommending dissolution to the shareholders. Then hold a shareholder meeting (or obtain written consents) to approve the dissolution. Document everything properly with corporate minutes showing the date, who was present, the vote tally, and the resolution text.

If all of your shareholders approve unanimously, make note of this in your corporate records. Unanimous approval allows you to skip filing the Certificate of Election and include the unanimous approval statement directly in your Certificate of Dissolution.

Step 3: File Certificate of Election (If Required)

If your shareholder approval wasn't unanimous and you don't qualify for short-form dissolution, file Form ELEC STK with the Secretary of State. This form requires basic information about your corporation, the date of the election, and how the vote was conducted. The filing fee is currently $30.

You can file online through the Secretary of State's bizfile portal or by mail. Online filing is processed immediately, while mail filings can take several weeks.

Step 4: Complete the Winding-Up Process

Now comes the actual work of closing your business. This includes collecting any outstanding receivables, liquidating assets, paying all creditors, resolving or providing for pending litigation, canceling contracts, terminating leases, closing bank accounts, and addressing any contingent liabilities. Keep detailed records of everything you do during this phase.

Pay special attention to employment obligations. Make final wage payments, provide required notices under the WARN Act if applicable, file final employment tax returns, and handle any pending workers' compensation claims. Employment claims are one of the most common sources of post-dissolution liability.

Once all debts are paid or provided for, distribute remaining assets to shareholders according to their ownership percentages or as provided in your articles or bylaws. Get written receipts from shareholders acknowledging receipt of distributions.

Step 5: File Final Tax Returns

Before filing your Certificate of Dissolution with the Secretary of State, you must file your final franchise tax return with the FTB. For regular corporations, this is Form 100. For S corporations, it's Form 100S. Check the "Final Return" box at the top of the form.

The final return covers the short tax year from the beginning of your tax year through the date of dissolution. Even if this period is less than 12 months, you still owe the full $800 minimum franchise tax for that tax year (no proration).

Don't forget federal tax returns. File a final Form 1120 or 1120-S with the IRS, checking the final return box. File all employment tax returns as well (Form 941, California DE-9, W-2s, 1099s).

Step 6: File Certificate of Dissolution (Form DISS STK)

Only after completing winding up and filing final tax returns should you file Form DISS STK with the Secretary of State. The critical requirement is that you must file the dissolution certificate within 12 months of filing your final tax return with the FTB. Miss this deadline, and the FTB may continue to assess the $800 annual minimum franchise tax.

The dissolution filing fee is $30 if filed online or by mail. Once the Secretary of State accepts your filing, your corporation's existence officially ceases, subject to the survival provisions in Section 2010.

Closing Bank Accounts During Dissolution

One of the most searched questions about dissolution is when and how to close your corporate bank accounts. This step is part of the winding-up process (Step 4) but deserves special attention because getting the timing wrong creates complications.

When to Close Accounts

Close your corporate bank accounts after you've paid all creditors and distributed remaining assets to shareholders, but before filing the Certificate of Dissolution. The corporation needs active accounts to receive final payments, write checks to creditors, and distribute assets. Once those transactions are complete, there's no reason to keep the accounts open.

What to Bring to the Bank

Your bank will typically require: (1) a certified copy of the board resolution authorizing account closure and dissolution; (2) the corporate officer's government-issued ID; (3) documentation of the shareholder vote to dissolve. Some banks may also ask for the filed Certificate of Election if you've already submitted one to the Secretary of State.

Handling Remaining Balances

Any funds remaining in the account after paying all debts should be distributed to shareholders according to ownership percentages. Get written acknowledgment from each shareholder. If you anticipate final bills or checks clearing after the account is closed, keep the account open long enough for those to process, or arrange alternative payment methods.

Record Retention

Keep copies of all final bank statements, account closure confirmations, and records of the final disbursements for at least 7 years. The IRS and FTB can audit dissolved corporations for several years after dissolution, and you'll need these records if questions arise.

What If Your Corporation Is Suspended by the FTB?

If the Franchise Tax Board has suspended your corporate powers for unpaid taxes or unfiled returns, you cannot dissolve until you revive the corporation. This is one of the most common obstacles to dissolution and adds significant cost and time to the process.

The Revival Process

To revive a suspended corporation, you must: (1) file all delinquent franchise tax returns (Form 100 or 100S for each missing year); (2) pay all outstanding minimum franchise taxes ($800 per year for each delinquent year); (3) pay all penalties (approximately 25% of unpaid tax); (4) pay all accrued interest (approximately 7% annually on outstanding balances).

Use the dissolution cost calculator above to estimate your total revival costs based on the number of years behind.

Timeline for Revival

After filing all delinquent returns and paying all amounts owed, the FTB typically takes 4-8 weeks to process the revival. During this time, the corporation remains suspended. Only after the FTB confirms revival can you proceed with dissolution filings at the Secretary of State.

Administrative Dissolution Alternative

For corporations that never conducted business or ceased business years ago with no assets, California offers an administrative dissolution program with potential tax abatement. This joint program between the SOS and FTB allows qualifying defunct entities to be terminated with partial or full forgiveness of back taxes and penalties. Contact the FTB directly to determine eligibility.

Tax Considerations: Stopping the $800 Annual Franchise Tax

For many California corporations, the driving force behind dissolution is stopping the $800 annual minimum franchise tax. Under Revenue and Taxation Code Section 23153, every corporation incorporated or qualified in California owes this minimum annual franchise tax regardless of income, activity, or assets.

The 12-Month Rule

You must file your Certificate of Dissolution with the Secretary of State within 12 months of filing your final franchise tax return with the FTB. This is stated in FTB Publication 1038 and is strictly enforced. Miss this deadline, and the FTB may continue assessing the $800 minimum tax indefinitely.

Short Tax Years: No Proration

California does not prorate the minimum franchise tax. Whether you dissolve on January 5 or December 30, you owe the full $800 for that tax year. Timing strategy: if you're dissolving near year-end, completing before December 31 saves you $800 for the next tax year. But don't rush and make mistakes just to save one year's minimum tax.

Dissolving a Professional Corporation (Dental, Medical, CPA)

Professional corporations (dental corporations, medical corporations, law corporations, CPA corporations, optometry corporations) follow the same general dissolution process as regular stock corporations, but with additional requirements under Corporations Code Sections 13400-13410.

Licensing Board Notification

Before dissolving, you must notify the relevant licensing board (Dental Board, Medical Board, California Board of Accountancy, State Bar, etc.) of your intent to dissolve. Some boards require formal notification and may impose waiting periods or conditions.

Patient and Client Records

Professional corporations have special obligations regarding patient/client records. Medical and dental corporations must arrange for secure transfer or storage of patient records in compliance with HIPAA and California Health and Safety Code requirements. Law corporations must address client file retention under State Bar rules. CPA firms must arrange for proper retention of workpapers and client files.

Professional Liability Considerations

Professional corporations should consider maintaining or obtaining tail coverage for professional liability insurance to cover claims that may arise after dissolution. Malpractice claims can surface years after services were rendered, and dissolution doesn't eliminate liability for pre-dissolution professional services.

Personal Liability After Corporate Dissolution

Directors and officers can face personal liability after dissolution if: they made false statements in dissolution certificates (certifying debts were paid when they weren't); assets were distributed to shareholders before paying creditors; the corporate veil can be pierced due to commingling, undercapitalization, or fraud; or they personally guaranteed corporate debts (guarantees survive dissolution).

Distribution of Remaining Assets to Shareholders

After paying all creditors and adequately providing for all known debts and liabilities, remaining corporate assets must be distributed to shareholders. The distribution follows ownership percentages unless your articles of incorporation or bylaws specify otherwise.

Complete all distributions before filing the Certificate of Dissolution. Distributing assets after dissolution is legally complicated because the corporation no longer exists except for limited winding-up purposes. Get written receipts from each shareholder acknowledging what they received.

Common Pitfalls and How to Avoid Them

Filing dissolution before completing winding up: The dissolution certificate requires you to certify under penalty of perjury that all debts have been paid or provided for. Filing before this is true creates perjury exposure and personal liability.

Missing the 12-month SOS filing deadline: Set a calendar reminder immediately after filing your final FTB return. Aim to file the dissolution certificate within 6 months to give yourself buffer room.

Attempting to dissolve while suspended or forfeited: Always check your status on the SOS website before starting dissolution. The SOS will reject filings from suspended/forfeited entities.

Forgetting federal and employment tax returns: In addition to California Form 100/100S, you must file final federal Form 1120/1120-S, final employment tax returns (Form 941, DE-9), and all year-end forms (W-2s, 1099s).

Frequently Asked Questions

Can I dissolve a corporation that has outstanding debts?

Technically yes, but not until you've paid those debts or made adequate provision for them. The Certificate of Dissolution requires certification that all debts have been paid or adequately provided for. If your corporation is insolvent, consider bankruptcy instead of or before dissolution.

What happens if I just stop filing tax returns and let the corporation go suspended?

The FTB will suspend your corporate powers, but the $800 annual minimum franchise tax continues accruing year after year, along with penalties and interest. The accumulated debt can reach tens of thousands of dollars. The correct approach is to formally dissolve.

Do I need a lawyer to dissolve my California corporation?

Not legally required, but highly advisable if your corporation has significant assets, unpaid debts, real estate or IP, pending litigation, complex contracts, or multiple shareholders with disputes. Simple corporations with no assets, debts, or contracts can often handle dissolution without legal assistance.

How long does the corporation continue to exist after filing the dissolution certificate?

Under Corporations Code Section 2010, the corporation continues to exist after dissolution for the sole purpose of winding up its affairs. For most corporations, the entity effectively ceases to exist upon filing because winding up was completed beforehand.

Can shareholders be held liable for corporate debts after dissolution?

Generally no, if dissolution was conducted properly. Exceptions include: distributions to shareholders before paying creditors, fraudulent statements in dissolution certificates, corporate veil piercing, and personal guarantees of corporate debts.

What if I want to dissolve a corporation with shareholders I can't locate?

You may qualify for court-supervised dissolution under Corporations Code Sections 1800-1806. For any remaining assets due to missing shareholders, comply with California's unclaimed property laws by reporting to the State Controller's Unclaimed Property Division.

Can a dissolved corporation be revived?

Yes, but only within five years of dissolution under Corporations Code Section 2010. Revival requires court approval and a showing of good cause.

How much does it cost to dissolve a California corporation?

For a simple DIY dissolution of an active corporation: approximately $860 (SOS filing fees $30-60, final year franchise tax $800). With professional help: $2,500-8,000+. Use the cost calculator above for a personalized estimate.

How do I close bank accounts when dissolving a California corporation?

Close corporate bank accounts during the winding-up phase, after paying all creditors and distributing assets but before filing the Certificate of Dissolution. Bring your board resolution, dissolution vote documentation, and government-issued ID. Keep all final statements for at least 7 years.

Taking Action: Schedule a Consultation

Properly dissolving a California corporation requires careful attention to both corporate law and tax requirements. Miss a step, and you could face ongoing $800 annual franchise tax obligations, personal liability for corporate debts, or complications with creditors and shareholders.

If you're considering dissolving your California corporation and want to ensure it's done correctly, I can help. As a California-licensed attorney with over 14 years of experience handling corporate dissolutions and business transactions, I work with businesses throughout California and internationally to properly close entities and minimize tax obligations.

Services I provide:

Review of your specific situation to determine the most efficient dissolution path
Preparation and filing of all required Secretary of State and FTB documents
Guidance on winding-up requirements and asset distributions

Schedule a 30-minute consultation to discuss your dissolution needs.