Source: http://www.sklaw.net/closing-down-the-business-dissolving-a-corporation-in-california/
Timestamp: 2017-06-25 15:29:42
Document Index: 548576468

Matched Legal Cases: ['§2010', '§2010', '§2010', '§2011', '§2011', '§2010']

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General Overview of Corporate Dissolution in California
If you have a corporation which is not actively engaged in business, it may be advisable to dissolve the corporation given the requirements applicable to corporations under California law which include: (i) payment of California’s $800 annual minimum franchise tax (which must be paid so long as the entity exists), (ii) preparation and filing of the annual Statement of Information with California Secretary of State together with the requisite filing fees, (iii) preparation and filing an annual tax return with the Franchise Tax Board (despite the fact that the entity no longer conducts business), and (iv) preparation of various documents associated with “corporate formalities” including corporate minutes of the shareholders and directors.
If you desire to dissolve a corporation in California, our firm can assist you with preparing the necessary documents to file with the Secretary of State together with the corporate minutes which properly memorialize the dissolution. Attorney involvement in the process of dissolving a corporation will insure that the proper documents are prepared and will reduce the risk of delay (which is often measured in months) and rejected filings that could occur if improper documents are filed.
Please note that for California corporate dissolutions that are intended to occur on an immediate basis, we recommend that clients pay California’s “expedite fee”, as in our experience, due to budgetary constraints at the California Secretary of State, there can often be significant delays associated with filing on a standard basis.
Once the Secretary of State has approved of the final corporate dissolution, and final corporate minutes have been duly authorized, the entity will be required to file a tax return marked final and the dissolution process will be complete.
Please note that if your corporation is suspended, it must first be revived before it can be dissolved. A suspended corporation must pay reinstatement fees.
Continued Existence of Dissolved Corporation
It is important to note that after dissolution a corporation continues to exist for an indefinite period to wind up its affairs, prosecute and defend actions, collect and discharge obligations, dispose of and convey property, and collect and divide its assets, and may only continue the normal corporate business necessary for winding up. Corp C §2010(a). Title to assets inadvertently or otherwise omitted from winding up remains in the corporation after final dissolution. Later distribution of these assets must be made to the persons who would have been entitled to receive them at the time the corporation was dissolved. Corp C §2010(c).
Actions or proceedings to which a corporation is a party do not abate because of proceedings for dissolution and winding up. Corp C §2010(b). Importantly, actions against a dissolved corporation arising before or after dissolution of the corporation may be enforced against the dissolved corporation to the extent of its undistributed assets. Corp C §2011. See also Penasquitos, Inc. v Superior Court (1991) 53 C3d 1180, 283 CR 135.
Under Corporations Code §2011 and Penasquitos, Inc. v Superior Court (1991) 53 C3d 1180, 283 CR 135 a cause of action against a dissolved corporation arising before or after dissolution of the corporation can be enforced against (a) the dissolved corporation to the extent of its undistributed assets and (b) shareholders of the dissolved corporation, if any assets of the dissolved corporation have been distributed to them, to the lesser of the extent of their pro rata share of the claim or the corporate assets distributed to them. Importantly, claims against shareholders must be commenced before the expiration of the statute of limitations or within 4 years after the effective date of the corporation’s dissolution, whichever is earlier.
Pleas note, a dissolved California corporation is qualified to be a debtor in a bankruptcy case. In re Western Asbestos Co. (Bankr ND Cal 2003) 313 BR 832 (citing Corp C §2010).
If you have any questions regarding this article, or how to dissolve a corporation in California, please give our office a call or contact us through this website.
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