Closing an LLC or Corporation
At some point in your Delaware business’ lifecycle, you may find it necessary to close your company. There are a number of reasons you may find to do so, but we're here to help with the process of canceling your Delaware LLC or dissolving your Delaware Corporation.
Dissolving vs Canceling: What's the Difference?
Many people use the terms “dissolving” and “canceling” interchangeably when referring to an LLC or corporation. While both terms generally point to the same end result, closing the company, they are technically distinct concepts under Delaware law.
The correct term depends on whether the business is a corporation or an LLC. In Delaware, a corporation is typically closed through dissolution, which involves filing a Certificate of Dissolution with the Delaware Division of Corporations. A Delaware LLC, on the other hand, is typically dissolved, wound up, and then formally canceled by filing a Certificate of Cancellation.
While the difference may seem small, each process has its own requirements and paperwork. Filing the correct document with the State of Delaware is an important step in properly closing the company and helping prevent future state filings, fees, or compliance issues.
When & Why to Close a Business
There are many reasons a business owner may decide to close a Delaware LLC or corporation. In some cases, the company has completed its purpose, never became active, or is no longer profitable. In others, the owners may be retiring, moving on to a new venture, restructuring their business, or ending a partnership.
A company may also need to be closed after a sale, merger, or ownership change, especially if the Delaware entity is no longer needed. Even inactive companies can continue to have state filing obligations, annual taxes, registered agent fees, and other compliance requirements. Simply stopping business operations does not automatically close the company or end those obligations. Properly closing the business helps create a clean legal and financial ending.
How to Cancel a Delaware LLC
Canceling a Delaware LLC is the formal process of closing the company with the State of Delaware. Simply stopping business operations does not automatically close the LLC or end its state obligations. Here are a few of the most important steps:
- Review the LLC Agreement - Before taking action, review the LLC’s operating agreement. The agreement may explain when the LLC can be dissolved, who must approve the decision, and how remaining assets should be distributed. If the LLC has multiple members, the members may need to vote or sign a written consent approving the dissolution.
- Wind Up the LLC’s Affairs - After the LLC is dissolved, the company should wind up its business affairs. Winding up generally means wrapping up the company’s remaining obligations before it is formally canceled. This may include collecting outstanding payments, paying debts, resolving contracts, notifying vendors or customers, closing business accounts, and distributing any remaining assets to the members.
- Pay Taxes & Fees - Before filing the Certificate of Cancellation, confirm that the LLC is current with Delaware. Delaware LLCs are generally required to pay the state’s annual franchise tax, and unpaid taxes may prevent the cancellation from being accepted. If the LLC was registered to do business in other states, it may also need to cancel those foreign registrations separately. Canceling the Delaware LLC may not automatically close registrations in other jurisdictions.
- File the Certificate of Cancellation - Once the LLC has completed the necessary wind-up steps, it can file a Certificate of Cancellation with the state. This filing formally cancels the LLC’s Certificate of Formation and ends the LLC’s existence as a Delaware entity. The Certificate of Cancellation typically includes the LLC’s name, the date of its formation, and the signature of an authorized person.
How to Dissolve a Delaware Corporation
Dissolving a Delaware corporation is similar to canceling a Delaware LLC in that the company must wrap up its affairs, address taxes, and file the correct document with the State of Delaware. However, corporations have a more formal internal approval process and different filing requirements.
- Internal Approval - Before filing with the State of Delaware, the corporation must properly approve the dissolution. In many cases, this begins with the board of directors. Once approved, the dissolution is then submitted to the stockholders. The corporation should keep records of the board resolution, stockholder consent or vote, and any related approvals.
- Wind Up the Corporate Affairs - After dissolution is approved, the corporation should begin winding up its business. This involves resolving the company’s affairs before assets are distributed and the company is fully closed. The corporation should be careful not to distribute assets to stockholders before debts, taxes, and known liabilities are addressed. Unlike an LLC, where distributions are usually governed by the LLC agreement, corporate distributions are generally made to stockholders.
- Franchise Taxes & Annual Reports - A Delaware corporation must be current with its Delaware franchise tax and annual report obligations before the Certificate of Dissolution can be filed. All taxes due through the effective date of dissolution must be paid, and all applicable annual franchise tax reports must be filed before the certificate can be accepted.
- File the Certificate of Dissolution - Once internal approval has been completed and Delaware taxes are addressed, the corporation can file a Certificate of Dissolution with the Delaware Division of Corporations. Filing this document formally dissolves the corporation with the State of Delaware.
Pre-dissolution Checklist
Before filing anything with the State of Delaware, business owners should take time to prepare the company for closure. Below is a quick checklist to review before submitting your Certificate of Cancellation or Certificate of Dissolution.
For Delaware LLCs
- Review the LLC operating agreement for dissolution procedures
- Confirm that the members have approved the decision to cancel
- Identify and resolve outstanding debts and contractual obligations
- Notify customers, vendors, landlords, & lenders
- Determine how the remaining assets will be distributed
- Confirm that Delaware annual LLC taxes are paid
- If the LLC is registered to do business in other states, check if foreign registrations must be withdrawn
- Prepare the Delaware Certificate of Cancellation
For Delaware Corporations
- Review the certificate of incorporation, bylaws, and any investor agreements
- Have the board of directors approve the dissolution of the corporation
- Obtain the required stockholder approval (unless a different procedure applies)
- Keep records of the board resolution or stockholder vote
- Resolve outstanding debts, contracts, and other obligations
- Settle customer, vendor, employee, or payroll matters
- Determine how remaining assets will be distributed to stockholders
- Confirm that all Delaware franchise taxes are paid
- File any required Delaware annual franchise tax reports
- Check whether the corporation is registered in other states and needs to withdraw from those states
- Prepare the Delaware Certificate of Dissolution
Post-dissolution
After the Certificate of Cancellation is filed, the owners of the LLC should keep copies of the filed document and any related tax records, account statements, and winding-up records. The LLC may also need to close bank accounts, cancel business licenses, terminate its registered agent service, and retain records for tax or legal purposes. Taking the time to properly cancel a Delaware LLC helps create a clear ending for the company and can reduce the risk of future fees or compliance issues.
Delaware Dissolution FAQs
Can I just stop using my Delaware company instead of closing it?
No. Simply stopping business operations does not formally close the company. The entity may continue to owe franchise taxes, registered agent fees, and other compliance obligations until it is properly closed.
Do I need to pay Delaware taxes before closing the company?
Before a Delaware company can be properly closed, it generally needs to be current with the State of Delaware. LLCs should pay any outstanding annual LLC taxes, while corporations must pay franchise taxes and file any required annual reports. Unpaid taxes or missing reports can prevent the dissolution or cancellation filing from being accepted.
Can I close a Delaware company that never did business?
Yes. A Delaware company that never operated or earned revenue may still need to be formally closed. Simply leaving the company inactive does not automatically end its Delaware obligations. The correct filing depends on whether the entity is an LLC or corporation, and any required Delaware taxes or fees may still need to be paid.
How long does it take to close a Delaware company?
A company that is current with Delaware and has no debts, contracts, or foreign registrations may be closed relatively quickly. Delays are more likely if taxes are unpaid, annual reports are missing, owners have not approved the closure, or the company must withdraw from other states.
Start Closing a Delaware Company
If you are ready to close your business, our team at Harvard Business Services, Inc. can help you review the requirements, prepare the necessary filing, and guide you through the process from start to finish.
Important: If you are dissolving a Delaware corporation, your 2025 Annual Franchise Tax must be paid before March 1st. The tax must be paid before submitting this form.
We are no longer accepting orders for Corporate Dissolutions in 2025. We recommend that you contact Delaware directly at corp.delaware.gov to submit the filing.
Submitting this form does not constitute placing an order. This is a quote service only.
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