California Certificate of Election to Wind Up and Dissolve

A California corporation that has voted to shut down files the California Certificate of Election to Wind Up and Dissolve with the Secretary of State to formally open its winding-up period. The filing signals that shareholders or the board have decided to end the business, and it authorizes the corporation to settle debts, notify creditors, and distribute remaining assets before a final Certificate of Dissolution closes the entity for good.

When the Certificate Is Required

California Corporations Code Section 1900 sets out two ways a corporation can elect to dissolve. The usual path is a shareholder vote: shareholders holding at least 50 percent of the corporation’s voting power must approve the dissolution.¹ Once that vote passes, the corporation must file the Certificate of Election “forthwith,” meaning promptly and without unnecessary delay.²

The board of directors can make the election alone, without any shareholder vote, in three narrow situations: the corporation has entered Chapter 7 bankruptcy, it has disposed of all assets and conducted no business for five consecutive years, or it has never issued any shares.¹ If the board acts on one of these grounds, the certificate must identify the specific circumstance that gives the board authority.²

Leaving a corporation inactive without formally dissolving doesn’t stop the meter. The Franchise Tax Board keeps assessing the $800 minimum franchise tax every year the entity remains on state records.³

When You Can Skip It

Two situations let a corporation bypass the Certificate of Election and go straight to the final dissolution filing.

Unanimous shareholder vote. If every outstanding share votes in favor of dissolution, the corporation can skip the election certificate and file the Certificate of Dissolution directly. This is the common shortcut for closely held corporations.⁴
Short Form Dissolution. A corporation formed within the past 12 months that never conducted business, never issued shares, and has no debts other than tax liabilities that will be satisfied or assumed by another entity can file a Short Form Dissolution Certificate instead.⁴⁵

Everyone else files the Certificate of Election first.

What Goes on the Form

Stock corporations use Form ELEC STK, and nonprofit corporations use Form ELEC NP. Before starting, pull the corporation’s exact legal name and its seven-digit entity number from state records.⁶

The form requires a mandatory statement that reads: “The corporation has elected to wind up and dissolve.” That language cannot be altered.⁷ The form must also identify whether the election came from a shareholder vote or a board resolution. If shareholders voted, state the number of shares voted in favor (not a percentage) and confirm those shares represent at least 50 percent of the voting power.⁶ If the board acted alone, spell out which of the three statutory circumstances applies.²

Signing Requirements

For a stock corporation where shareholders made the election, the certificate needs two signatures: one from the chairperson, president, or a vice president, and a second from the secretary, chief financial officer, treasurer, assistant secretary, or assistant treasurer.⁶ Each signer includes a typed name and title. If the officers on the form don’t match the Secretary of State’s records, the filing will be rejected.

For nonprofit corporations, a majority of the directors currently in office must sign and verify the certificate, or the sole director if there is only one.⁸

How to File

The fastest option is BizFile California, the Secretary of State’s online portal. Create an account, upload the completed form as a PDF, and you’ll get immediate confirmation of receipt.⁴ You can also mail the signed form to the Secretary of State in Sacramento; include a self-addressed envelope if you want a filed-stamped copy back. Standard processing for mailed documents runs from several days to a few weeks depending on volume.

There is no filing fee for the Certificate of Election itself. Certified copies cost $5.00, and plain copies are $1.00 for the first page plus $0.50 for each additional page.⁹

The Secretary of State offers three tiers of expedited processing:

24-hour service (Class C): $350
4-hour service (Class A): $500, drop-off only in Sacramento, requires preclearance
Same-day service (Class B): $750, document must arrive by 9:30 a.m. for a response by 4:00 p.m.¹⁰

What Happens After the Filing

Once the Secretary of State accepts the certificate, the corporation’s status changes to “Active – Pending Termination.” Regular business stops, but the corporation can keep operating to the extent needed to wind up: settling contracts, collecting receivables, and selling assets.

The board must send written notice of the winding-up process by mail to every shareholder who did not vote for dissolution and to every known creditor whose address appears in the corporation’s records. Shareholders who voted in favor don’t need this notice. The notice gives creditors the chance to submit claims before assets are distributed.

If someone believes the winding up isn’t being handled properly, California law lets a shareholder holding at least 5 percent of any class of outstanding shares, any shareholder of a close corporation, or three or more creditors petition the superior court to supervise the process.¹¹

Tax Deadlines the Filing Triggers

The election starts several clocks running at once, and missing any of them creates penalties that can outlive the corporation.

Franchise Tax Board

Before the Secretary of State will accept the final Certificate of Dissolution, the corporation must be in good standing with the Franchise Tax Board. That means filing all delinquent returns, paying outstanding balances with penalties and interest, and filing a final-year return with “Final Return” checked and “FINAL” written at the top of the first page. A corporation the FTB has suspended or forfeited must first apply for a Certificate of Revivor and get reinstated before the Secretary of State will process dissolution documents.¹²

There is a way to avoid the $800 minimum franchise tax for the final year and any partial years while paperwork is pending. The corporation must timely file the final tax return for the preceding year (including any extension), stop doing business in California after the last day of that preceding year, and file the dissolution documents with the Secretary of State within 12 months of filing that final return.¹² Slipping past that 12-month window means another $800 assessment.

IRS Form 966 and Final Returns

On the federal side, file IRS Form 966 (Corporate Dissolution or Liquidation) within 30 days of adopting the dissolution resolution. The 30 days run from the shareholder or board vote, not from the state filing date. Attach a certified copy of the resolution. If the plan is amended, file an updated Form 966 within 30 days of each amendment.¹³ Qualified subchapter S subsidiaries and tax-exempt organizations are exempt from Form 966; regular S corporations are not.

The corporation must also file a final income tax return, Form 1120 for C corporations or Form 1120-S for S corporations, with the “final return” box checked. S corporations also mark “final K-1” on each shareholder’s Schedule K-1. Sales of property during winding up may require Form 4797.¹⁴

Employment Development Department

If the corporation has employees, submit the final payroll tax return, wage report, and payment to the California Employment Development Department within 10 days of ceasing operations, rather than at the end of the quarter.¹⁵ Close the employer payroll tax account at the same time. The same 10-day deadline applies to a sale of the business.

Extra Step for Nonprofits

Nonprofits face an additional layer of oversight. Any nonprofit public benefit corporation, nonprofit mutual benefit corporation holding assets in charitable trust, or nonprofit religious corporation must obtain a written waiver of objections to its asset distribution from the California Attorney General before the dissolution can be finalized. This requirement applies even if the corporation never actually operated or obtained tax-exempt status.¹⁶

To get the waiver, submit a complete dissolution package to the Registry of Charities and Fundraisers. It includes a letter requesting the waiver (signed by a director or the corporation’s attorney), balance sheets for the last three years of activity, documentation of the planned asset distribution, copies of the Articles of Incorporation, the Certificate of Election to Wind Up and Dissolve, and the executed Certificate of Dissolution. There is no fee for the review, though delinquent filings can trigger charges. Normal turnaround is about one month.¹⁶

A nonprofit cannot distribute any assets before receiving the Attorney General’s waiver.¹⁶ If the nonprofit plans to sell or transfer all or substantially all of its assets, it must give the Attorney General 20 days’ advance notice before the transfer, unless the Attorney General provides a written waiver of that notice.

Reversing Course

A corporation that has filed the Certificate of Election but has not yet finished dissolving can reverse the decision. The Secretary of State provides a Revocation of Election to Terminate form (Form REV-ELE-STK) for stock corporations in “Active – Pending Termination” status.¹⁷

Two conditions must be met. Shareholders holding a majority of the voting power must approve the reversal, and no assets can have been distributed as part of the dissolution. Once assets have gone out, revocation is off the table. The filing fee is $30.¹⁷

The Follow-Up Certificate of Dissolution

The Certificate of Election opens the winding-up window. It doesn’t close the corporation. After debts are settled, creditors are notified, remaining assets are distributed, and state and federal tax obligations are handled, the final step is filing a Certificate of Dissolution with the Secretary of State.⁷ That second filing ends the corporation’s legal existence. Until it’s filed, the entity remains on state records in pending-termination status, and the FTB can continue to assess taxes.

1
California Legislative Information. California Code CORP 1900
2
California Legislative Information. California Code Corporations Code 1901
3
Franchise Tax Board. Corporations
4
California Secretary of State. Frequently Asked Questions – Business Entities
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California Secretary of State. Short Form Dissolution Certificate – Form DSF STK
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California Secretary of State. Instructions for Completing the Certificate of Election to Wind Up and Dissolve – Form ELEC STK
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California Secretary of State. Certificate of Election to Wind Up and Dissolve
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California Secretary of State. Nonprofit Certificate of Dissolution – Form DISS NP
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California Secretary of State. Business Entities Fee Schedule
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California Secretary of State. Service Options
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California Legislative Information. California Code Corporations Code 1904
12
Franchise Tax Board. FTB Publication 1038
13
Internal Revenue Service. Form 966 – Corporate Dissolution or Liquidation
14
Internal Revenue Service. Closing a Business
15
Employment Development Department. Changes to Your Business
16
State of California – Department of Justice – Office of the Attorney General. Dissolution
17
California Secretary of State. Revocation of Election to Terminate – Stock Corporations