Closing a California Business: The Full Checklist

Most business owners think of closing as one filing. In California it’s usually six or seven, with different agencies, forms, and deadlines, and each one keeps sending notices until it hears from you. The Secretary of State doesn’t tell the EDD, the city doesn’t tell CDTFA, and nobody tells the county clerk about your DBA.

This checklist covers every kind of business: sole proprietors, partnerships, LLCs, and corporations. The entity-specific steps are in their own guides, how to dissolve an LLC in California and how to close an S corp in California. Start here for everything around the entity.

What’s the checklist for closing a business in California?

Work through it in this order. The first steps protect the owners from liability, and the last ones stop the recurring bills.

1. Decide and document. For an entity, get the owners’ vote in writing. For a partnership, follow the partnership agreement.
2. Review contracts. Lease, equipment leases, loans, merchant processing, software subscriptions, and anything you personally guaranteed.
3. Notify customers, vendors, and creditors of the closing date.
4. Handle employees: notice if Cal-WARN applies, final pay on the last day, and final payroll filings.
5. Close the seller’s permit and file the final sales and use tax return, including sales of equipment and fixtures.
6. Sell or distribute assets and pay debts.
7. File final income tax returns, federal and California.
8. File the entity’s termination forms with the Secretary of State, if it’s an LLC or corporation.
9. Close the local accounts: city business license or tax certificate, county permits, and professional or health licenses.
10. Abandon the fictitious business name with the county clerk.
11. Cancel the EIN after every return is filed, and close the bank account last.
12. Keep the records.

Does the type of business change what I file?

Yes, mostly at the state and federal tax level and at the Secretary of State. The employee, sales tax, DBA, and local steps are the same for every business.

Business type	Final federal return	California entity filing	Secretary of State
Sole proprietor	Schedule C with your Form 1040	None. The business income goes on your own return.	Nothing to file
General partnership	Final Form 1065 and final K-1s	Final partnership return	Only if it filed a statement with the Secretary of State
LLC	Schedule C, Form 1065, or 1120-S, depending on tax status	Final Form 568	LLC-3 and LLC-4/7 (see the LLC guide)
S corporation	Final Form 1120-S, final K-1s, and Form 966	Final Form 100S	ELEC STK and DISS STK (see the S corp guide)
C corporation	Final Form 1120 and Form 966	Final Form 100	ELEC STK and DISS STK

The IRS’s closing a business page lists the federal forms by business type, including Form 4797 if you sell business property and Form 8594 if you sell the business. A sole proprietor also files Schedule SE for the final year if net earnings from the business were $400 or more.

What do I owe my employees when I close?

All wages, on the last day. When an employer discharges an employee, Lab. Code § 201(a) makes the earned and unpaid wages due and payable immediately. Closing the business is a discharge, so the final check goes out on the final day, not the next regular payday.

Missing that date is expensive. If an employer willfully fails to pay final wages on time, Lab. Code § 203(a) continues the employee’s daily wages as a penalty until paid, for up to 30 days. For an employee earning $200 a day, that’s up to $6,000 per employee. Ask your payroll provider to run the final checks early so they’re ready.

If an employee has already filed a wage claim or threatened one, that’s a dispute. You need employment litigation counsel, and I can refer you.

Does Cal-WARN apply to a small business?

Only to larger ones. California’s WARN Act applies to a covered establishment, which Lab. Code § 1400.5(a) defines as any industrial or commercial facility that employs, or has employed within the preceding 12 months, 75 or more persons. For a covered establishment, a termination of operations requires written notice 60 days before it takes effect, to the employees, the EDD, the local workforce development board, and the city and county officials, under Lab. Code § 1401(a).

Most businesses I work with are well under 75 people. If you’re near the line, count everyone who worked there in the past year before you set a closing date.

How do I close my EDD payroll account?

File the final return, wage report, and payment within 10 days of closing, regardless of the normal due dates, then close the account. The EDD’s Changes to Your Business page gives the steps in e-Services for Business: select Close Account, enter the date of the last wage paid, and submit the declaration. The California Office of the Small Business Advocate lists the three filings: the final payroll tax deposit (DE 88) with payment, the quarterly return (DE 9), and the wage detail (DE 9C).

The EDD also expects you to give departing workers information about unemployment insurance, and its form For Your Benefit (DE 2320) does that. On the federal side, the IRS wants a final Form 941 or 944 for the quarter of the last wages, a final Form 940, and W-2s to each employee.

How do I close my seller’s permit?

Tell CDTFA in writing, then file a final return. CDTFA’s permits and licenses page says you must let it know in writing of your intention to close or sell, either through its Online Services portal or on form CDTFA-65, Notice of Close-Out. CDTFA then closes the account and cancels the permit.

The final sales and use tax return should include your sales of fixtures and equipment, per CDTFA’s Publication 73. That catches people. Selling the espresso machine or the display cases to another business can be a taxable sale that goes on the last return. For an annual filer, CDTFA’s regulation says the closing return is due by the last day of the month after the calendar quarter in which the business was discontinued.

Don’t leave the permit open “just in case.” CDTFA warns that using a seller’s permit when you’re no longer actively engaged in business is a misdemeanor. Under CDTFA Regulation 1699, a permit holder who never gave notice can be liable for taxes run up by someone else using that permit, generally limited to the quarter of the transfer and the three quarters after it. Keep your sales tax records for four years after the account closes, as CDTFA’s Publication 74 directs.

Do I have to cancel my DBA?

Yes, if you filed it in the last five years. Bus. & Prof. Code § 17922(a) says a registrant who stops doing business under a fictitious business name filed in the previous five years shall file a statement of abandonment with the county clerk where the statement was filed. The abandonment is published the same way the original was, and an affidavit of publication is then filed with the clerk.

The statement lists the name being abandoned, the business address, and the original filing date, file number, and county. In Ventura, Santa Barbara, or Los Angeles County, that’s the county clerk’s office that took the original filing. My page on DBAs and fictitious business names covers the original filing and publication rules.

Which local licenses and permits do I cancel?

Every one you hold. The city business license or business tax certificate is the one people forget, and some cities keep billing until they hear from you. Health permits, alarm permits, signage permits, and state professional or occupational licenses each have their own process.

The state’s CalGOLD tool, which the California Office of the Small Business Advocate points to, lists the local, state, and federal agencies that may have issued permits for your type of business in your city. Run it once and use the results as your checklist.

What do I file with the Franchise Tax Board?

A sole proprietor files nothing separate. The last year of business income goes on your personal Form 540. An LLC, partnership, or corporation files a final return for its last year. The FTB’s Publication 1038 says to file all delinquent returns and pay all balances, file the final return with the Final Return box checked and “final” written at the top, and stop doing business in California after the final taxable year.

For an LLC or corporation, the minimum tax keeps coming until the Secretary of State filing is made. An LLC avoids the next year’s $800 by filing a timely final return, doing no business after that year, and filing its cancellation within 12 months of the final return, under Rev. & Tax. Code § 17947. A corporation gets the same result under Rev. & Tax. Code § 23332(c) by filing its certificate of dissolution within the same 12-month window.

If the FTB has suspended the entity, the Secretary of State can’t accept its termination papers until it’s revived. See suspended LLCs and corporations for the revivor steps.

How do I close my EIN?

Send the IRS a letter, but only after every return is filed. The IRS asks for the business’s legal name, the EIN, the business address, and the reason you want to close the account, with a copy of the original EIN assignment notice if you kept it, mailed to the IRS in Cincinnati, Ohio. The IRS says it can’t close the account until all necessary returns are filed and all taxes are paid.

Contractors you paid during the final year still get Form 1099-NEC. The IRS reporting threshold is $2,000 for payments made after December 31, 2025, up from $600, so check the right year’s rule with your CPA.

Does closing the business end my lease and loans?

Closing the business doesn’t end a lease or a loan. The landlord and the lender can still collect what’s owed under the contract, and if you signed a personal guarantee, they can collect from you.

Read the lease for an early termination right, an assignment or sublease clause, and the guarantee. Landlords often negotiate a surrender, because an empty space with a cooperative tenant beats a lawsuit against a closed business. My page on personal guarantees on commercial leases explains what a guarantor is on the hook for, and commercial lease review covers the clauses to look at.

Insurance deserves a call too. A professional or products liability policy written on a claims-made basis covers only claims made while it’s in force, so ask your broker about tail coverage before you cancel.

Should I sell the business instead of closing it?

If anyone will pay for the customer list, the name, the lease, or the equipment as a going concern, it’s worth asking before you liquidate. A sale changes the checklist. The buyer will want an EDD Certificate of Release of Buyer (DE 2220) and a CDTFA tax and fee clearance, because without them the buyer can inherit your unpaid payroll or sales taxes. That’s covered in how to sell a small business in California.

A worked example: closing a sole proprietorship

Maria runs a coffee cart in Oxnard as a sole proprietor under the fictitious name “Harbor Coffee,” filed with the Ventura County Clerk in 2023. She has two part-time employees, a seller’s permit as an annual filer, and a city business tax certificate. She decides to close on August 15, 2026.

Date	Step	Authority
August 15, 2026	Final paychecks handed to both employees on their last shift, with the EDD’s DE 2320	Lab. Code § 201 and EDD
By August 25, 2026	Final EDD filings and payment, then close the employer account online	EDD, 10-day rule
August 2026	Notify CDTFA online and sell the cart and grinder to another vendor	CDTFA
By October 31, 2026	Final sales and use tax return, including the sale of the cart and grinder	CDTFA Regulation 1699(h) and Publication 73
September 2026	File and publish the statement of abandonment of “Harbor Coffee”	Bus. & Prof. Code § 17922
September 2026	Cancel the city business tax certificate and the county health permit	City and county rules
Early 2027	Final Forms 941 and 940, W-2s, and 1099s, then the 2026 personal return with a final Schedule C and Schedule SE	IRS
After everything is filed	Letter to the IRS to close the EIN, and close the business bank account	IRS

Maria has no Secretary of State filing because a sole proprietorship isn’t registered there. If Harbor Coffee had been an LLC, she’d add the final Form 568 and the LLC-4/7, and she’d want the LLC canceled within 12 months of the final return to avoid a 2027 tax.

What if the owner has died or can’t act?

Then someone with legal authority has to do all of this, and who that is depends on how the business was owned. A sole proprietor’s business assets pass through the owner’s estate or trust. An LLC interest passes under the operating agreement and the estate plan, as I explain in what happens to an LLC when the owner dies.

If the owner is alive but incapacitated, a business power of attorney is what lets a trusted person sign the final returns and the closing forms without going to court. That planning belongs in business succession planning, well before anyone needs it.

Frequently asked questions

How long does it take to close a business in California?

The employee and payroll steps happen in the first 10 days. The final sales tax return and the final income tax returns follow on their normal schedules, which can run into the next year. For an LLC or corporation, plan on the Secretary of State filing landing a few months after the last day of business, within 12 months of the final return.

Do I need to notify the state that I’m closing a sole proprietorship?

There’s no single state notice, because a sole proprietorship isn’t registered with the Secretary of State. You notify each agency you registered with: the EDD if you had employees, CDTFA if you had a seller’s permit, the county clerk for a DBA, and the city for a business license.

What happens if I don’t formally close my LLC or corporation?

The minimum tax keeps accruing each year, with penalties and interest, and the FTB can eventually suspend the entity. A suspended entity has to be revived, which means paying the back years, before the Secretary of State will accept its termination papers.

Can I close my seller’s permit online?

Yes. CDTFA accepts written notice of a closing through its Online Services portal, or you can file form CDTFA-65 with a local office. Either way, you still file a final sales and use tax return.

Do I have to pay out accrued vacation when I close?

Yes, if you offered paid vacation. Lab. Code § 227.3 requires all vested vacation to be paid as wages at the final rate when employment ends, and a policy can’t make it forfeit. Check your written policy and ask your payroll provider to include it in the final check so it goes out on the last day with everything else.

How long should I keep business records after closing?

At least four years for sales tax records, which CDTFA requires after the account closes, and at least four years for employment tax records under IRS guidance. Property and income tax records should be kept until the statute of limitations runs for the year you disposed of the property, and your CPA can tell you how long that is for your returns.

Do I need a lawyer to close my business?

A sole proprietor with no employees, no lease, and no debts can usually close with a CPA and the agency forms. A lawyer is worth it when there are co-owners, a lease or loan you guaranteed, employees, assets to distribute among owners, or a buyer for part of the business.