Unfortunately, not all businesses are successful. Maybe the initial funding did not come through. Possibly there was too much competition for the business to survive.
Or perhaps the business owner just got tired of dealing with all the headaches and is ready to close up shop. Every day clients contact us because they no longer want their company and they want to know how to close a business.
In order for an entity to be formally closed with the state of Delaware, a certificate needs to be filed with the Secretary of State’s office. For a corporation, it is called a Crtificate of Dissolution. For a limited liability company, it is known as a Certificate of Cancellation.
Just as a Certificate of Incorporation/Formation was filed when the entity was formed, an official filing needs to be submitted to the Delaware secretary of state to legally close the entity.
In addition to filing the Certificate of Dissolution/Cancellation, all outstanding and current Franchise Tax fees must be paid. This means if the entity owes any past due Franchise Tax fees, these amounts must be brought up to date. Also, the state of Delaware will require the current year’s Franchise Tax assessment be paid when the entity is formally closed. The current year’s Franchise Tax fees are not pro-rated within the year; so the same amount of Franchise Tax fees will be imposed regardless if the entity closes in January or December.
The actual amounts due will vary depending on the company type (corporation versus LLC), the stock structure (minimum stock versus maximum stock) and such. Therefore, if you are curious how much it would cost to close your entity, simply contact our office and we will gladly provide a price quote.
You should also discuss the situation with your accountant and your attorney to determine your entity’s internal details that will need to be attended to upon termination. Also, you’ll need to contact the IRS and send them a copy of the filed certificate to end your tax liability. Of course, closing your business can be disappointing, but we will help make the process as quick and simple as possible.
Photo Attribution: Nicholas Eckhart/flickr
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.