When a Delaware company is no longer viable, there are two options available to the company owner in order to complete a business dissolution.
One approach is to file the proper cancellation (for an LLC) or dissolution (for a corporation) documents with the state of Delaware to formally close the company.
Just as formation documents are filed with the Secretary of State’s office to create a Delaware company, official documents must also be filed to legally close the company.
An alternative route is to have the acting Registered Agent resign upon the entity. While this course of action is not the same as filing a formal certificate, it will put the company into a forfeit status. An entity in a forfeit status is considered an inactive company by the state of Delaware.
However, the resignation process actually takes a couple of months to complete; it does not occur right away like a cancellation/dissolution. These steps must be taken before the Registered Agent is formally resigned from the company:
At this point, the state of Delaware gives the entity another 30 days to rename the former Registered Agent as its current Registered Agent for the entity or to find a new Registered Agent to act on its behalf.
During the approximate 60-day waiting period, the entity can potentially still receive notices for payments due, such as the annual Franchise Tax Fee.
Until the entity is actually resigned upon and in a forfeit status, the Franchise Tax notices will continue to be generated by the state of Delaware.
People often assume—incorrectly—that if their company is in the resignation phase they will not have to pay that company’s Franchise Tax Fee. The Franchise Tax Fee is automatically imposed on the entity by the state of Delaware at the beginning of each new year.
Regardless of whether the entity has conducted any business, it will generate a Franchise Tax Fee. If the entity is resigned upon and the Franchise Tax Fees are not paid, the assessment stays with the entity.
Therefore, if the entity is restored at a later date, the outstanding Franchise Tax Fees must be paid at the time of a renewal filing. However, no new Franchise Tax fees are imposed on an entity that is in a forfeit status.
All possible options and subsequent consequences should be reviewed by the company’s responsible parties to determine the best course of action for the entity.
There are 9 comments left for Business Dissolution: Two Ways to Go About ItAtanas Atanasov said: Friday, May 11, 2018
Hello, I want to seek the option to forfeit my company with the 60 day waiting period. My question is - If I never want to use the company again, what happens to the accumulated tax after 20 years? does it affect me in any way ? Thank You!HBS Staff replied: Monday, May 14, 2018
The state of Delaware does not assess Franchise Tax fees on a company once it is forfeit. Therefore, any outstanding Franchise Tax fees would only need to be paid if a revival is filed. But no new Franchise Tax fees are imposed once the company is forfeit.
stephen jeffery nicholls said: Wednesday, March 28, 2018
I would like to close this company can you please advise as to how and the cost implications ?HBS Staff replied: Wednesday, March 28, 2018
We will need the company name and Delaware state filing number. You can email that information to firstname.lastname@example.org or call us at 1-800-345-2677.Levent Gurbuzer said: Tuesday, February 27, 2018
I have a company, named SERENITY MARINE CO. INC. REGISTERED IN WILMINGTON, DELAWARE. I WISH TO CLOSE THE COMPANY TOTALLY. PLS ADVISE AND QUOTE FOR YOUR SERVICES.HBS Staff replied: Wednesday, February 28, 2018
Please email your request, along with the company name and state file number, to email@example.com and we will respond. You can also call 1-800-345-2677 and a live person will answer and assist you.Ann cargile said: Tuesday, February 20, 2018
Can you tell me how we go about making our company inactive?HBS Staff replied: Tuesday, February 20, 2018
The answer to that is company specific. If you email your company name to firstname.lastname@example.org, we can provide a price quote.
Joenie Vergara said: Friday, February 9, 2018
Thank you for this guides, now I know how can I help my friend about to his problem which is what he needs to do for his company because he wants to close his company, you giving me and my friend a good Ideas for that problem that's why I'm very thankful for this blog, keep sharing good information and guides.Thanks.HBS Staff replied: Monday, February 12, 2018
We are glad our blog was helpful to you and your friend.
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