How to Close Your Delaware Company

As we all know in the business world, as much as you want your new business to succeed, not all new ventures will work out. Approximately 40% of new businesses will wind things down within the first few years. Whatever the situation may be, sometimes it's best to cut your losses and close your LLC or corporation.

When that happens, you may need to close your business and may need to take care of a few important steps. 

What Will You Need to Close a Company?

When your company was originally filed, a Certificate of Formation/Certificate of Incorporation was submitted in order to create the new entity. When it is time to close a Delaware company, a document is filed with the Delaware Division of Corporations; this document is called a Certificate of Dissolution for corporations, and a Certificate of Cancellation for LLCs.

Close Your Company in the Current Calendar Year

Sometimes, clients plan to close their company to coincide with the Delaware franchise tax deadline. The Delaware franchise tax is due on or before March 1 of each year for Delaware corporations and on or before June 1 of each year for Delaware LLCs. When you pay the franchise tax, you’re actually paying for the previous year—the franchise tax paid in any given year is for the preceding calendar year. Delaware franchise taxes are not pro-rated, so your entity will owe the franchise tax fees for the whole year, even if your company is only active for January 1st. By filing your cancellation or dissolution by Dec. 31st, you’ll avoid having to pay the next year's franchise tax.

Additional Considerations before Closing Your Company

While the process of closing a company is fairly straightforward, there are things that may need to be considered before you proceed.

• Review your LLC Operating Agreement or corporation bylaws; both should specifically state how your Delaware company should be closed, including how to handle outstanding debts, how to liquidate assets and how to notify the appropriate parties involved.
• Speak with your accountant to see if your company needs to file federal and/or state tax returns for one final time.
• Contact the IRS in order to terminate your company’s EIN (Federal Tax ID Number).
• Evaluate all unresolved contracts, loans and obligations your LLC or corporation may owe.
• Meet with your bank representative in order to close your business bank accounts.
• If your LLC or corporation filed for Foreign Qualification in another state, then typically a Certificate of Withdrawal will need to be filed with that state.
• Remember that once a company is officially closed, it can be expensive to re-activate it, if it is even feasible to do so. Also, keep in mind that your original company name may no longer be available.

Steps to Closing Your Delaware Company

We can make the process of closing your company as simple as possible. All you need to do is call us at 800-345-2677 or email us and we'll take it from there. We can prepare and file all the necessary documentation for you.

Before we can proceed with the filing of the documents, however, we'll have to make sure all your company's Franchise Taxes are paid, including the current year. We can prepare a Certificate of Dissolution or Certificate of Cancellation for your signature and forward it to you via fax or email.

It must be signed by the authorized person of the LLC or an appropriate officer of the corporation. Once signed, simply return it to us by fax or email, and we will file the certificate with the state of Delaware within 24 hours.

The state typically takes 3 to 5 business days to return the receipt of filing. As soon as the approved document is available, we will forward it to you for your records. We strongly suggest clients speak with their accountant/tax professional before proceeding with a dissolution or cancellation of a company. Once the filing is approved, it is difficult to undo.

If your company has a bank account, you should close the account before filing the Certificate of Dissolution/Cancellation. If you have filed taxes with the IRS, you will need to file a closing tax return after filing the Certificate of Dissolution/Cancellation, and attach a certified copy of the certificate to your final tax return.

To summarize, here are the steps:

1. Make sure you are current on all Franchise Tax payments and in good standing with the state.
2. Contact us to initiate service and prepare the necessary documentation.
3. Sign and return the Certificate to us and we'll file it with the state.
4. Expect your confirmation from the state via email in 3-5 business days.

For more information...

• Dissolving a Delaware corporation
• Cancelling a Delaware LLC

Please contact us with any questions or to get started!

Photo Attribution: Pete Jelliffe