Why Am I Still Required to File LLC Form 568 After Dissolving My LLC?

Closing an LLC doesn’t always mean the paperwork ends immediately. Many business owners are surprised to find they still need to file certain forms even after officially dissolving their company. One of the most common post-dissolution requirements is Form 568 in California, which can lead to confusion and unexpected obligations.

Filing Requirements

Even after dissolution, California requires Form 568 for any tax year in which the LLC had activity. The Franchise Tax Board (FTB) enforces this rule to ensure all outstanding tax liabilities, income, and deductions are properly reported. If an LLC operated for even part of the year, it must file for that period.

California treats LLCs as pass-through entities, meaning income and losses flow through to members. However, the state still requires an annual filing to reconcile taxes owed, including the $800 minimum franchise tax, even if the LLC had no revenue. Under California Revenue and Taxation Code 18633.5, LLCs classified as partnerships or disregarded entities must submit Form 568 annually until the dissolution is fully processed.

Dissolution timing affects filing obligations. If an LLC dissolves mid-year, it must still file for that period. The FTB does not automatically recognize a business as closed simply because it stopped operating. The entity remains responsible for filings until the state formally acknowledges the termination. Even after submitting a Certificate of Cancellation, the LLC must file Form 568 for the final tax year.

Payment Obligations

Dissolving an LLC does not immediately eliminate financial obligations. California requires final payment of any outstanding franchise taxes or fees accrued before dissolution. If an LLC operated at any point during the tax year, it remains responsible for these costs, even if business activities ceased early in the year.

Beyond the franchise tax, additional fees may apply based on income. California imposes a gross receipts fee on LLCs with annual revenue above $250,000. In 2024, an LLC earning between $250,000 and $499,999 owes an extra $900, while those exceeding $5 million must pay $11,790. These fees are based on total income, not just California earnings. Even if the LLC dissolved mid-year, the fee is calculated on full-year revenue.

Estimated tax payments also factor in. LLCs must typically make estimated franchise tax payments by April 15. If an LLC dissolves mid-year but has already made these payments, it may qualify for a refund if the amount paid exceeds the final tax liability. However, if no estimated payments were made and taxes are still owed, late fees and interest accumulate. The FTB applies a late payment penalty of 5% of the unpaid tax, plus 0.5% for each month the balance remains unpaid, up to 25%.

Forced Filings for Dissolved Entities

Dissolving an LLC does not immediately end state filing requirements. The FTB does not consider an LLC terminated until all outstanding tax obligations, fees, and informational filings are settled. Even if an owner believes the company has ceased to exist, the state may still require compliance for a final reporting period.

If dissolution paperwork is submitted late in the year, termination might not be recorded until the following tax period, triggering another required filing. Delays in processing a Certificate of Cancellation can also result in the FTB continuing to recognize the entity as active for tax purposes.

Residual financial activity can create filing requirements. Even after ceasing operations, lingering transactions such as refunds, debt settlements, or asset liquidations may generate reportable income or deductions. If the business receives a final payment from a client after dissolution, that income must still be reported on Form 568. Similarly, forgiven debt could be considered taxable income under federal and state regulations, requiring proper documentation.

Potential Penalties

Failing to file Form 568 after dissolving an LLC can lead to financial penalties. The most immediate is the failure-to-file penalty, which amounts to $18 per member for each month the return is late, up to 12 months. For a five-member LLC, this could total $1,080 for a full year of noncompliance.

California also enforces late payment penalties on any outstanding tax liability. The FTB applies a 5% penalty on the unpaid balance, plus 0.5% for each month the amount remains overdue, capped at 25% of the total owed. If an LLC had past-due franchise taxes or fees, these penalties continue to accrue even after dissolution until the balance is settled. Interest is also charged on unpaid amounts, compounding daily at the current state interest rate.