Closing your business is a hard decision to make. However, it may be the best thing to do if the circumstances are no longer beneficial for you.
Dissolving an LLC in Delaware
When a limited liability company (LLC) in Delaware chooses to end its business operations within the state, it has to dissolve its registration with the state. Delaware requires companies to wind up all its affairs and close the operations properly. To do this, your LLC needs to undergo a process and submit the proper paperwork.
Five Simple Steps To Follow
Your LLC is a separate legal entity. It has tax and filing obligations. Thus, it is necessary to inform the state if you wish to close it. To do this, you have to learn how to dissolve an LLC in Delaware. The process is not as complicated as what people think. However, it requires you to follow every step carefully.
To help you better understand the process of how to dissolve an LLC, we came up with a simple guide.
- Vote on the dissolution. The first thing your LLC needs to do is to call a meeting with all the members who have an interest in the profits of the company. The LLC Act of Delaware requires Delaware LLCs to have an affirmative vote for the closing of business by a two-thirds majority. Written consent can also serve as proof. Make sure that it includes members that own more than two-thirds of the LLC.
- Appoint someone to take care of the winding-up affairs of your LLC. State law requires companies to settle all lawsuits against it and pay all the outstanding obligations. Additionally, your LLC also has to make provisions on how to address future claims of all known creditors. Having a member, manager, or team in charge of these affairs will help make sure everything is in order. Once they satisfy all liabilities, they can start distributing any remaining assets.
When paying debts and obligations, the liquidation manager has to follow the order of priority according to the law. Prioritize current creditors. Then, set aside enough funds to pay off foreseeable creditors. You can notify all known creditors to explain that your LLC is dissolving. Include in the notice instructions on how and until when they can submit claims. For possible unknown claimants, you can publish a notice in a newspaper. After that, you can pay members for an equity interest.You may also want to review the operating agreement of your LLC. Check if it has provisions about the closing of the business. It may help you know how to handle the outstanding debts, liquidation of assets, and notification of relevant parties.
- Pay your company’s taxes. Before ending your business operations, you have to make sure that you no longer have tax obligations. You can check with the Franchise Tax Section of the Delaware Department of State. You can contact their office by email or phone. Pay the franchise tax for the year. It is the annual fee that LLCs in Delaware have to pay.
Among the requirements of the Secretary of State is to attach a proof of tax payment when submitting the dissolution paperwork. You should also file the final income tax return and withholding return of the LLC. Make sure you check the box stating that it is an out of business filing. Check the website of the Internal Revenue Service (IRS) for the checklist and forms that you will need.
- File the necessary paperwork. Visit the website of the Secretary of State to download the forms that you will need. Make sure that you use the forms for LLCs. You will also need to have a Corporate Certificate Cover Memo. You can download this from the website too.
File a completed Certificate of Cancellation of a Limited Liability Company along with the cover memo with the Secretary of State. To fill out the forms, prepare to provide the following information:
- Name of the LLC
- The date you filed the Articles of Organization of the LLC
- The date of filing for dissolution
- Signature of the authorized personnel filing the dissolution paperwork
- Contact information
The filing comes with a $200 filing fee. The state may take approximately 2-3 weeks to process the dissolution of your LLC. The Secretary of State will send a confirmation copy in the address you indicated on the cover memo.
If you want expedited processing, you can request for it. However, it requires an additional payment.
- $100 for 24 working hours
- $200 for same day
- $500 for two hours
- $1,000 for one hour
- Close bank accounts and cancel other licenses. You may have opened bank accounts and credit lines under the name of your company. If this is the case, consider closing them. After the dissolution, you will not be able to use the accounts for other purposes anyway. Leaving the accounts open may also leave you vulnerable to liabilities and obligations that could lead to legal issues. If your LLC has obtained any business permits or licenses, you will have to cancel all of them. Doing this will protect you from possible fiscal or reporting obligations.
Finishing the whole cancellation process is crucial for your Delaware LLC. If you fail to dissolve properly, your company will continue to have liabilities with the state. It will remain responsible for paying the annual franchise tax fee and filing legal documents.
A Helping Hand
If you are unsure of how to dissolve an LLC in Delaware, DoMyLLC can help you. Our team of experts can provide a professional service that you can expect in a prompt manner. We can give you a personalized service depending on the necessities and situation of your company. Leave the handling of the paperwork with us for a smooth transaction.
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