California Business Dissolution Contract San Diego Details

Dissolution of a Partnership

In order to cease a partnership, there are three steps that must be taken: (1) dissolve the partnership; (2) wind up the partnership; and (3) terminate the partnership. California partnerships may be dissolved for reasons of (1) expiration of the term stated in the partnership agreement; (2) upon a stated event in the partnership agreement; (3) continuation of the partnership would be unlawful; (4) a court determination that the partnership should dissolve. California Corporations Code § 16801.

Dissolving a Partnership

Dissolving a partnership means causing the partnership to cease doing business. After dissolution, the partnership still exists for the purposes of settling its affairs.

Winding Up a Partnership

The winding up process of a partnership involves the fulfillment of pre-existing contractual obligations, paying partnership debts, collecting partnership claims, and the collection and liquidation of the partnership assets.

Termination of a Partnership

When the winding up process is complete, the partnership may be terminated.

LLC Dissolution

Dissolving an LLC in the State of California is lawfully accomplished in accordance with California Corporations Code § 17350. In order to dissolve and wind up its affairs, a California LLC must (1) have allowed for such dissolution in its operating agreement; (2) have been subject to a successful vote by a specific percentage of its members as specified in its operating agreement; or (3) upon a judicial dissolution.

Judicial dissolutions are available to a California LLC when an action is filed by a manager or member if (1) carrying on business in accordance with the articles of organization and operating agreement is no longer practical; (2) dissolving the LLC is necessary to protect the rights of the complaining members; (3) abandonment occurs;(4) management or membership stalemate occurs; or (5) fraud or mismanagement by controlling persons.

A dissolved LLC exists to wind up its affairs and dispose of assets. The winding up process may be conducted by managers or members upon the mailing of written notice of winding up to all known creditors and claimants. At the conclusion of winding up, a certificate of cancellation is filed with the Secretary of State.

Corporation and S-Corp Dissolution

The California Corporations Code is the governing body of law which must be followed in order to legally dissolve a corporation or S-Corp. A California corporation or S-Corp may be dissolved through voluntary proceedings, involuntary proceedings, or through proceedings initiated by the State of California.

Voluntary Dissolution of a Corporation or S-Corp

In California, shareholders representing at least 50% of the voting power of a corporation or S-Corp may vote or by written consent elect to dissolve and wind up the corporation or S-Corp. California Corporations Code §§ 194, 1900(a). After such an election, a certificate is prepared and signed by the Secretary of the corporation or S-Corp and filed with the Secretary of State.

Involuntary Dissolution of a Corporation or S-Corp

Involuntary dissolutions begin in California with an authorized party filing a complaint in a state court of competent jurisdiction. The complaint must state a claim for relief on the grounds that (1) the business has been abandoned for more than one year; (2) an even number of business directors cannot agree and are locked in a stalemate that is not allowing the corporation or S-Corp to move forward and conduct business or that property or business will be impaired or lost; (3) dissension and deadlock among shareholders is preventing business from being conducted or directors have not elected for two or more years; (4) pervasive fraud, mismanagement, abuse of authority, persistent unfairness to shareholders, or waste of property by officers or directors has occurred; (5) liquidation is necessary for the protection of close corporation shareholders. California Corporations Code § 1800(b).

S-Corp Dissolution by State of California

In California, if a corporation or S-Corp fails to pay its state taxes, it may be suspended and forfeited by the state. This makes the contracts of the corporation or S-Corp voidable by those who have contracted with the corporation or S-Corp, prohibits the corporation from disposing of real property, filing lawsuits in state courts, defending or appealing adverse decisions, and subjects the corporation or S-Corp to monetary penalties.

Liquidation

Although the liquidation procedure varies depending upon whether the dissolution was voluntary or involuntary, liquidation generally involves (1) accounting for and gathering the corporation or S-Corp assets; (2) paying corporation or S-Corp debts; (3) distributing any remaining assets to the shareholders pro rata based upon share ownership.