How to Close Your Delaware Company

By Andrew Millman, Brett Melson, Amy Fountain Tuesday, December 18, 2018

Closed forever

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 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.

There is an alternative option that allows you to avoid the process described here. You can simply have your Registered Agent resign on the company, which will place it into "forfeit" status. 

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 faily 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, all your company's Franchise Taxes must be 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...

Please contact us with any questions or to get started!

Photo Attribution: Pete Jelliffe

Disclaimer

THE AUTHOR OF THIS BLOG ARTICLE IS NOT A LAWYER AND HARVARD BUSINESS SERVICES, INC. IS NOT A LAW FIRM. THE ARTICLE ABOVE IS NOT INTENDED AS LEGAL ADVICE AND SHOULD NOT BE TAKEN AS LEGAL ADVICE. THIS SHORT ARTICLE IS STRICTLY TO MENTION SOME ASPECTS OF DELAWARE’S CORPORATION LAWS AND/OR LAWS RELATING TO OTHER FORMS OF ENTITIES WHICH YOU MAY NOT BE FAMILIAR WITH. WE RECOMMEND THAT YOU CONSULT WITH A LAWYER BEFORE FORMULATING A STRATEGY WHICH WILL BE SUITABLE FOR YOUR SPECIFIC CASE.

More By Andrew Millman More By Brett Melson More By Amy Fountain

There is 1 comment left for How to Close Your Delaware Company

Michael Grillis said: Thursday, December 15, 2016

I would like to close my Grillis medical office building , LLC.Could you send me forms for this or let me know what I need to do?I would like to close by Dec. 31, 2016. Thanks

HBS Staff replied: Tuesday, December 20, 2016

Mr. Grillis, your best bet, in terms of speed, would be to give us a call at 1-800-345-2677, Ext. 6911. We can help you properly close your LLC by the end of the year. You can also Live Chat with us via our homepage at www.delawareinc.com.

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