All good things must come to an end, and sometimes this applies to businesses as well. You may be headed to bankruptcy, or maybe you’re just ready to retire or move on to a new venture. No matter the business’s financial situation or what debts you owe, it’s important to officially dissolve your business with the state. Otherwise, the state will still expect the business to pay taxes and file annual reports. Even if your business isn’t operating, it could be subject to fines and financial penalties. These penalties may fall on the individual owners or members to pay. It could negatively impact your credit and your future business ventures. To avoid expensive fines and fees when it’s time to dissolve your Delaware business it’s important to complete all necessary steps of dissolution. This page will walk you through how to dissolve a business in Delaware and how we can help.
It’s important to think about your exit strategy before you want to dissolve your corporation or LLC. What will happen to your employees? Do you need to hold a vote and get shareholder approval? How will you distribute assets among owners or members? The most important step is to keep a secure and thorough record of all of the business’s dealings, so when it’s time to dissolve, you’ll have a plan that you can simply follow.
The first step to dissolution is to calculate the value of your business. You’ll need to value everything the business owns: real estate, inventory, assets — even the business’s goodwill. You’ll gather all the documents related to business operations, especially contracts with third parties and tax information. You can use one of many methods to determine the business’s value, such as market capitalization, times-revenue method, book value, or liquidation value. If you’re not sure how to value things, you may want to hire a professional. If you hire a CPA or a business valuation specialist, you’ll need to share your records for them to value the business. If you use our Worry-Free Compliance Service, our dashboard will help keep your business documents organized to make gathering this information easier.
After you’ve assessed the value of the business, you’ll need to account for all the business’s debts. You need to consider how much you owe and to whom you owe it. Consider all your third-party contracts, including those with suppliers, lenders, and delivery companies. Just because you’re closing your business doesn’t mean the debts go away. If your business doesn’t pay its debts, creditors might be able to sue you individually as an owner, member, director, or officer.
Ordinarily, owners of corporations or LLCs are protected from personal liability. But if you purposefully avoid paying the company’s debts, you could be liable anyway. Therefore, it’s important to have a complete picture of your Delaware business’s debts when dissolving the business.
There are various Articles of Dissolution in Delaware. The paperwork you’ll need to file will depend on your business type. To officially dissolve a Delaware corporation, you’ll need a Certificate of Dissolution to file with the Delaware Division of Corporations (the Delaware Corporation Commission). If you want to dissolve a Delaware LLC, you’ll need a Certificate of Cancellation.
When you’re ready to dissolve, you can file online using the Division’s Document Upload Service or file by mail or in-person using the Division’s forms and cover letter.
In addition to the state’s requirements, you’ll need to follow the instructions in your LLCs operating agreement or corporation’s bylaws. When you create your operating documents, you can choose what procedures the business will follow during dissolution. It’s important to create these documents when you form the business. If you don’t have an operating document, you’ll only have the defaults in Delaware law.
We can provide LLCs with a template to write an operating agreement during the formation process to streamline dissolution. No matter what your operating agreement or bylaws say, however, you still need to file dissolution paperwork with the state to officially close the business.
You’ll want to cancel all your business’s permits, licenses, and registrations. Your business might have licenses or permits at the state, local, and federal levels. Your county or municipality might have required zoning or sales tax permits, or you might have applied for industry-specific licenses. Some of these licenses and permits might automatically renew, so it’s essential that you identify and cancel all the licenses and permits your business holds to avoid fines and penalties.
To wrap up the business’s legal and financial obligations, you’ll file your final tax returns with the federal government. You’ll also want to check with Delaware’s Franchise Tax Section to see if the business owes any state taxes. To alert the IRS to your business’s closure, you’ll need to cancel your Employer Identification Number.
If your business has employees, you’ll need to follow all federal and state laws regarding employee payments after closing. You’ll need to know if the state requires the business to pay out other earned benefits to your employees. Be sure to check with your state, municipality, and county governments to see what they require.
After you’ve completed your internal dissolution process, valued the business, paid off its debts, filed final tax returns, and canceled all licenses and permits, the final step is to file dissolution documents with the Delaware Division of Corporations. Corporations will file a Certificate of Dissolution while LLCs will file a Certificate of Cancellation. When you file either of these dissolution documents, you’ll include the business name; the names and addresses of members, partners, directors, or officers; and any required approvals that you obtained. Filing will alert the government to your Delaware voluntary dissolution. It ends the business’s tax and annual report obligations. Your business is now closed, and you can move forward to your next chapter.
We know your business is important to you, and you want to wind it up the right way. Our team of formation experts is here to help during business hours, and we can help with every step in your business’s lifecycle. It’s better to start planning for dissolution early, so don’t wait. Get started today, and we’ll be here to help your business every step of the way.
Disclaimer: The content on this page is for information purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
The Delaware Division of Corporations requires you to file a Certificate of Dissolution (corporations) or Certificate of Cancellation (LLCs) to dissolve a Delaware business.
To dissolve a Delaware LLC, you’ll pay a fee to the Delaware Division of Corporations when you file your LLC’s Certificate of Cancellation.
The time it takes to dissolve a Delaware LLC will depend on your unique business circumstances. Some LLCs will have more assets to value or debts to pay off. Some LLCs will need member approval. You’ll first need to follow the dissolution procedures in your LLC operating agreement. Then, you’ll file a Certificate of Cancellation with the Delaware Division of Corporations. The actual Certificate of Cancellation you’ll file is simple to complete, and you can file online, by mail, or in person.
To dissolve a Delaware nonprofit corporation, you’ll file a Certificate of Dissolution and follow the same procedures as a for-profit corporation. If you’re dissolving a Delaware unincorporated nonprofit association, you can amend your filings with the Delaware Division of Corporation to let the government know of its dissolution.
Delaware Business Resources
Business Dissolution by State