Are Dissolution and Cancellation the Same?

This post is about dissolution and cancellation of limited liability companies (LLCs) in California.

It is based on an Avvo question that I answered. Please see What is the difference between a canceling or dissolving LLC?

Dissolution and Cancellation are Different…

Dissolution (and winding up) of a limited liability company is the process that the LLC goes through to get ready for termination of its existence (i.e., cancellation by the Secretary of State).

Cancellation is the process that the Secretary of State goes through that results in termination of the LLC’s powers, rights, and privileges after the LLC has gone through dissolution and winding up of its affairs.

…But Work Together

Put another way, dissolution and cancellation are the two steps that must be taken, by two different parties (the LLC and the State), for an LLC’s existence to end. While both steps usually are required, they are not the same thing (if they were, two different terms probably would not be used).

So, in most cases, dissolution proceeds pursuant to Corporations Code Section 17707.01, and cancellation occurs pursuant to Section 17707.08(c).

However, if the LLC has not conducted any business, it may go immediately to cancellation – there is no need for dissolution and winding up. See Corporations Code Section 17707.02 .

Please note that whereas (in California, at any rate) dissolution applies to both LLCs and corporations, cancellation applies to LLCs but not to corporations.

For more information about dissolution of such entities, please see How to Kill Your Company when that’s the Only Choice.

Dana H. Shultz, Attorney at Law +1 510-547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.