How to Cancel a Delaware LLC
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Please note: The information on this page pertains to Delaware LLCs. If you have a Delaware corporation you wish to close, please see our "Dissolving a Corporation" page.
At some point in the business’s lifecycle, you may find it necessary to dissolve an LLC -- a process that culminates in the Delaware Certificate of Cancellation. Canceling an LLC will protect the owner from future liability and prevent further taxation. There are a couple of ways to initiate the cancellation process. Learn how in this How to Dissolve an LLC guide.
How to Cancel a Delaware LLC
If you’re ready to close your business, canceling a Delaware LLC generally involves a few legal and administrative steps. You can cancel your Delaware LLC by following these steps:
- Review the LLC Operating Agreement
- Vote to Dissolve
- File Articles of Dissolution
- Settle Debts
- File Final Taxes
- Distribute Assets
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 represent the same result (closure of the company), it is important to note that, technically, they are distinct processes.
The correct term depends on whether you are the owner of a corporation or an LLC. In Delaware, "dissolution" refers to the process of closing a corporation through the filing of a Certificate of Dissolution. LLCs, on the other hand, are "canceled" through a Certificate of Cancellation.
While the difference in meaning is small, each process has unique paperwork that needs to be filed properly with the State of Delaware in order to close your company.
Before Canceling Your LLC
Before you begin the Delaware LLC cancellation process, you should typically terminate all your LLC’s business affairs, such as:
- Consult the LLC Operating Agreement to determine what is necessary for canceling your LLC. You may need to take a member vote to confirm the process
- Settle any pending lawsuits
- Allocate assets
- Pay state franchise taxes and federal taxes, including any late fees and interest due
- Settle and close any outstanding business of the LLC
- Sell or disseminate the LLC's property
- Settle any liabilities the LLC may be facing, such as creditors' claims, loans, or contracts
- If your LLC has been registered to operate in other states, file additional forms in each of those states to terminate your Foreign Qualification
- Close your LLC’s bank account (keep in mind there are fees associated with closing the LLC)
The most important step in the Delaware LLC cancellation process is to file a Certificate of Cancellation.
Filing a Certificate of Cancellation
Pre-filing checklist
- Filing Certificate of Cancellation. Our team will help you prepare the document.
- One member (owner) of the LLC must sign the Certificate of Cancellation.
- Pay the cancellation and preparation service fees, as well as the current year's Delaware Franchise Tax Fee.
- File the Certificate of Cancellation.
Keep in mind that once a Delaware LLC is canceled, the company name becomes available for anyone else in the state to utilize.
After Canceling Your LLC
After you’ve completed the Delaware LLC cancellation process, you may need to write a letter to the IRS, requesting closure of your LLC's EIN. Include the full name of the LLC, its address, and a copy of the Certificate of Cancellation.
Can a Canceled LLC Be Reinstated?
Generally, you cannot renew a formally canceled LLC. If the cancellation was filed in error, a Certificate of Correction could be filed undoing the cancellation. This would include a Certificate of Correction fee plus Franchise Tax, and the name would still need to be available to correct the filing.
Special Cases
Some LLC cancellations involve additional steps depending on some special circumstances. If any of the situations below apply, you may need to take extra actions before filing the Certificate of Cancellation.
- Single-member LLC: If you are the sole owner, you can usually approve the cancellation yourself, but you should still document the decision and properly wind up the business.
- Inactive or never-used LLC: Even if the LLC never conducted business, you typically must still pay any outstanding Delaware franchise taxes before cancellation.
- Foreign-qualified LLCs: If your Delaware LLC is registered to do business in other states, you may also need to file a withdrawal or termination in each of those states.
- LLC with outstanding debts: As mentioned above, all debts, obligations, and creditor claims should be resolved before cancellation to reduce potential liability.
The Safest, Most Efficient Way to Cancel Delaware LLCs
Harvard Business Services, Inc. can help you cancel your Delaware LLC in a professional and prompt manner. When you enlist our team for the Delaware LLC cancellation process, we will expertly assemble the required paperwork and forward it to you via email or fax for your signature.
After you sign and return all necessary documents to us by fax, mail, or email, we will file the Certificate of Cancellation with the Delaware Secretary of State within 24 hours.
The Delaware Division of Corporations generally takes three to five (3-5) business days to return the receipt of filing to us; once we receive it, we will immediately forward it to you via email for your records.
It is very important to complete the Delaware LLC cancellation process once you’ve decided to move forward. If you do not legally and officially cancel your LLC, your company will continue to be held responsible for the annual Delaware Franchise Tax Fee as well as your LLC's annual Registered Agent Fee until either the Registered Agent resigns or until the state of Delaware voids the company.
FAQs
How Much Does It Cost to Dissolve an LLC?
To file a Certificate of Cancellation in the state of Delaware for your Limited Liability Company, it will include the Certificate of Cancellation fee plus the Franchise Tax. We can help provide an accurate cost and submit the document to the Delaware Division of Corporations on your behalf.
Why should I cancel my LLC?
Canceling your LLC formally closes the business with the state and prevents ongoing obligations. If you don’t cancel it, the company may continue to accumulate annual fees, even if you’re no longer operating. Proper cancellation also helps limit potential legal exposure by ensuring debts are addressed and business affairs are wrapped up correctly.
Do I still owe taxes if my LLC never operated?
An LLC may still owe annual franchise taxes or state fees even if it never conducted business. These obligations begin once the LLC is formed and continue until the company is formally canceled. To stop future tax liability, you must file the proper cancellation documents with the state.
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