Effective January 1, 2019, the Franchise Tax Board (“FTB”) has the authority to administratively dissolve suspended entities. The FTB’s new procedures are available for both qualified domestic corporations as well as qualified domestic limited liability companies (“LLCs”).
Assembly Bill No. 2503 (“AB 2503”) was approved by Governor Brown on September 22, 2018, and authorized the FTB to abate, upon written request by a qualified entity, unpaid qualified taxes, interest and penalties for the taxable years in which the entity certifies, under penalty of perjury, that it was not doing business. AB 2503 addresses a longstanding procedural problem for stale business entities that had ceased operations, but had no means to formally dissolve absent paying substantial taxes and penalties for tax years where no business was conducted.
A qualified domestic corporation or a domestic limited liability company that is:
- Registered more than 12 months with the California Secretary of State (“SOS”);
- Ceased doing business or never conducted business in California; and
- Has no assets.
The qualified domestic limited liability company may file FTB 3716, Domestic Limited Liability Company Request for Voluntary Administrative Cancellation. See the FTB 3716 Instructions for information.
For the qualified entity to be approved, the entity needs to pay any taxes, penalties and interest that are due up until the date that the business ceased operations. However, if no taxes, penalties, or interest are otherwise due for years where the business was still operating, the FTB will abate the outstanding annual $800 franchise taxes, penalties and interest after operations ceased, for qualifying entities.
Read more about AB 2503 here.
Further guidance from the FTB can be found here.