Whether you're a new or experienced entrepreneur, personalized legal advice will help you to ensure your business is compliant, protect your growing assets and build your wealth. At Wyoming LLC Attorney, we provide targeted services for all business formations, including high-quality legal advice. We're passionate about giving you everything you need to succeed. Here we cover what you need to know about reinstating or reopening a dissolved LLC in California.
What is an LLC?
An LLC is a limited liability company and a business structure in the United States where - critically - the owners are not personally responsible for the business's debts or liabilities. This is a popular form of business ownership that reduces the risk for business owners, and it's a hybrid entity, combining the characteristics of a corporation with those of a partnership or sole ownership model.
Why would an LLC dissolve in California?
The reasons to dissolve an LLC in California might be intentional, or beyond your control. Here are some common reasons:
- Judicial - if the company hasn't paid its taxes.
- Economic - if the business's operating environment has changed and the entity can no longer operate in a profitable way.
- Operational - if the business is being challenged by mismanagement, low cash flow, defective products, poor accounting practices, or disagreements amongst partners, for example.
- Time - if the business doesn't have a succession plan.
- Evolutionary - if the business owner decides a different business structure would be more appropriate.
What does it mean for an LLC to dissolve?
An LLC is a legal entity, so you must work through a legal process to dissolve it. When the LLC has been dissolved it will no longer be obliged to pay taxes and fees, or to file any further documentation. Completing this process ends the LLC entirely and you are then free to set up a new LLC if you wish, or a different type of business if it serves your goals more appropriately.
Types of dissolvement
As mentioned above, there are different reasons to dissolve an LLC. They broadly fall into two categories, as follows:
Voluntarily: for example, if you or you and your business partners decide to cast a vote to dissolve the company, or if a dissolution trigger occurs, according to your LLC operating agreement. A common example here is the death of a partner.
Involuntarily: This relates to factors outside of your control, such as judicial or economic. A common example here would be bankruptcy.
How to reinstate an LLC in California
To reinstate an LLC in California, there are several steps you must follow. Broadly speaking, these are:
- To apply for articles of reinstatement
- To update your company information
- To submit your application and payment.
In California, your LLC will have been previously suspended or forfeited through either the California Secretary of State (SOS) or the California Franchise Tax Board (FTB). You will reinstate your LLC with the same agency. There are slightly different processes and fees applied by each agency. (See below)
How does this process differ depending on the state you operate in?
The process to reinstate an LLC will differ by state. For example, you will use a different agency (potentially from a choice of more than one agency) within each state. Each agency will have its own procedural rules and fees. Legal and tax advice can be very useful here to ensure you work through the process as smoothly as possible and without delays.
How much does it cost to reinstate your LLC in California?
The fees required to reinstate your California LLC depend on the agency you are using to reinstate your LLC. For example:
If your California LLC was suspended by the Secretary of State, you need to pay a $20 filing fee and a $250 penalty to the Franchise Tax Board.
If your California LLC was suspended by the Franchise Tax Board, you will need to pay different penalties and fines. Details of these are provided by the FTB when you reinstate but usually include a $2,000 per tax year where a return was not filed.
Cost to file
Costs to reopen your California LLC can change, so it's best to speak to an expert to find out exactly what costs will be involved. Often these exceed the basic filing costs because you need legal paperwork and additional company setup advice and guidance to get the process completely right. Official costs can change too. For example, until 1st July 2023, the cost of forming a California LLC with the California Secretary of State has been reduced, and the fee for the Articles of Organization have been waived altogether - albeit temporarily.
There are other fees that will apply to your California LLC which must be factored in. For example:
- A registered agent may cost around $125 - $300. California law states that you must use a registered agent for this process.
- A statement of Information costs around $20
- The LLC Annual Franchise Tax in California is $800
- As of 1 January 2022, SOG charges $20 for a Labor Judgment form.
There will potentially be other costs too, such as the cost of drawing up your California LLC Operating Agreement. This is a legal document about your business's ownership, how the business will be managed, and how profits will be shared between members. It's well worth getting specialist legal support to draw up this important document, as it will be used for any later judicial processes if a dispute is lodged.
However, other aspects of your LLC do not have specific costs assigned to them. For example, you don't have to pay anything to register (or reinstate) your business name when you file your Articles of Organization.
Is it better to reinstate my LLC or start a new one in California?
There are various considerations that you need to make, depending on your business goals and existing situation. A good legal and tax advisor can help you work through the most relevant considerations and ensure you make the right decision.
Can I reinstate my LLC? ✕
Yes, reopening a California LLC is possible if you apply through the relevant agency, file the necessary papers and pay the fees. See above for more information.
How do I reinstate my business? ✕
To reopen your California LLC, you will need to apply through the agency that dissolved your LLC. In California, the relevant agencies are the California Secretary of State (SOS) or the California Franchise Tax Board (FTB).
What happens if your LLC expires? ✕
LLCs can cease to exist for different reasons. For example, they may not have filed their federal taxes. For example, an LLC in California can be SOS Canceled by the Secretary of State if it doesn't pay fees to the state. The LLC can also be dissolved by the agreement of the members. The process for dissolving, canceling, or otherwise shutting down an expired LLC will depend on the underlying reason for the expiration. Different fees, paperwork, and administrative processes will apply. Although you can access the relevant agency forms online, Legal and tax support is a valuable investment to make sure you follow the rules correctly.
The costs of reinstating an LLC in California depend on the agency you are registering through. These fees (and details of mandatory paperwork) also can vary over time.
For the latest fees, you can visit: https://www.sos.ca.gov/business-programs/cannabizfile/cannabis-forms-and-fees/limited-liability-companies-llc-california for the California Secretary of State (SOS) and https://www.ftb.ca.gov/about-ftb/ for the California Franchise Tax Board (FTB).
There are pros and cons to each approach, so your choice will depend on what works best for your situation. For example, it may be better to reinstate your California LLC to take advantage of your existing brand equity, make use of your existing customer and supplier networks and rapidly get back to running your sound business.
For other situations, it may be better to start a new LLC with a new brand, business proposition, and model, especially if your previous business wasn't as sound as you hoped and you wish to start afresh with your new learning and experience. After all, being an entrepreneur is a learning curve, and many business owners will find that they have new and better ideas as they progress in their business journeys.
Here to help
Wyoming LLC Attorney is here to help you make the right decision for your business goals and aspirations, whether you are simply looking for some legal or tax guidance, or wish to outsource the process of applying for a California LLC, reinstating a California LLC or even dissolving an LLC in California. Our team of friendly, experienced legal professionals offers all of the services you need at highly affordable prices, and we're wholly committed to helping you achieve the best possible outcomes - and build a sustainable, successful business!
Please contact us to find out more and to book time with one of our attorneys. We are flexible, efficient, and here to help when you need us. Alternatively, click here to begin forming your California LLC now without delay, and with our expert assistance.