The 4th Quarter of the year has come around again. For some, it is time to start thinking about your 2012 business goals, however for others it may be time to consider cancelling your company. We file thousands of companies each year and the unfortunate truth is that not all of those companies will continue to operate year after year. While we don’t like to see a business close, we do appreciate the opportunity to serve as your registered agent. For those business that will not be operating in 2012, now is the time to consider a cancellation or dissolution. Cancelling a business now rather than after the first of the year will save you from paying another year of franchise tax.
This is how it works: When franchise taxes are paid in March and June (March for a corporation, June for an LLC) of any year, they are paying the tax for the previous year. So when you paid franchise taxes in 2011, you were paying for the 2010 operating year. These taxes are not pro-rated. If you were open even one day in 2010, you paid the entire franchise tax in 2011. Just like for a business active now, they will owe a franchise tax in 2012 for the current 2011 year.
So when closing your business in 2011, there will be a cancellation/dissolution fee, as well as the franchise tax payment for 2011. This franchise tax payment would typically not be due until 2012, but when you close the company, all taxes are due at the time of the cancellation/dissolution.
Contact Harvard Business Services for help with this service. HBS will prepare a Certificate of Cancellation/Dissolution for signature, and forward via fax or email. Once executed, the Cancellation document will need to be returned by fax or email to Harvard Business Services. Then the Certificate will be filed with the State of Delaware later that day. The State typically takes 3-5 business days to return the receipt of filing. As soon as the approved Cancellation document is available we will forward it to you for your records.
This document is the death certificate for the company. Sometimes banks will ask for it when closing out company bank accounts. You may also be asked by your accountant to provide this document when preparing your taxes, because the IRS will require it with your “Final” tax return.
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.