Your Business is Dead – Are You Liable for its Obligations?
Last month, I wrote about how to terminate a company’s existence by dissolution (How to Kill Your Company when that’s the Only Choice).
Since then, people have asked me what their personal responsibility is under California law if the corporation or LLC had outstanding obligations at the time it was dissolved.
Assuming that you go through the dissolution process properly and that you do not have any “alter ego” problems, your personal liability generally will be limited to the amount of any distributions that you received at the time of dissolution.
This limitation is set forth in Corporations Code Section 2011 with respect to corporations and Section 17355 with respect to limited liability companies.
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.
Dana Shultz is a business-savvy lawyer located in Northern California's San Francisco Bay Area (in the East Bay, near Oakland) who has in-depth knowledge of law, business, technology, and the needs of startup and early-stage companies.
Is this the case even if the obligation is the minimum annual back taxes to the Franchise Tax Board? Their collections dept. claims that they may go after the members of the LLC personally for the LLC’s taxes.
@Komal
The discussion in this post has the qualifier “Assuming that you go through the dissolution process properly….”
As the earlier post (How to Kill Your Company…) notes, part of the dissolution process is filing a final franchise tax return. If the final return is not (properly) filed, then the protection discussed in this post will not be available.