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What must be done to dissolve a California business?

That shop you and your friend opened 20 years ago in Northern California has run its course. It was a good, fun and profitable business for the most part, but people just aren't buying your trinkets the way they once did. It's time to renew the lease, but retirement and that long-awaited trip to Hawaii sound pretty good right now.

It's time to close up shop.

Remember all that paperwork you filled out when you started that business -getting licenses, opening a bank account, filing corporation documents and such? You need to undo that. You can't just put a sign up in your shop that says "Closed" and walk away.

The dissolution of your business requires a number of steps and depends on whether your business is a sole proprietorship or a partnership. They include:

  1. Following rules of dissolution. Sole proprietors don't need to consult with any partners if they choose to shutter the business. But if your business is a partnership and has a partnership agreement or is an LLC or a corporation, there are rules of dissolution to follow.
  2. Notifying the state. Limited and general partnerships that filed documents with the state to start the business must file documents certifying the business is being terminated through a Certificate of Dissolution.
  3. Paying final taxes, including income tax, sales tax and payroll tax. The Internal Revenue Service has a checklist to offer guidance of everything that needs to be done.
  4. Canceling business licenses.
  5. Notifying creditors that you intend to stop doing business with them. Corporations and LLCs must tell creditors the business is being dissolved and provide them with an address, and a deadline, to file any final claims.
  6. Settling with creditors and collecting money owed to the business.

This is just a start to what you'll need to do to shut down a business other than a sole proprietorship. There's a lot to do, and it needs to be done right. A qualified attorney who works on small-business law can help you make sure all the tasks are performed properly.

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