Delaware is one of the most popular states to form an LLC, but with an annual tax of $300, keeping unused Delaware LLCs open can get expensive. Properly dissolving an LLC is essential to close business affairs and protect the LLC owners. The procedure to close a Delaware LLC is not complex, and you can elect to dissolve one at any time. Read on to learn how to dissolve an LLC in Delaware.
Understanding LLC Dissolution in Delaware
Dissolving an LLC in Delaware can make sense if you created an LLC you don’t need, if the company is no longer economically viable, if the LLC purpose is completed, or for various other reasons. Dissolving a limited liability company can be best if you move on to other business ventures.
When dissolving a Delaware LLC, you must wind up the business before filing for dissolution. This includes closing accounts, filing final tax returns, paying off company debt and creditors, and distributing any remaining assets or property to LLC Members.
You will have to contact the Delaware Department of State, Franchise Tax Section, concerning any taxes due when canceling the Delaware LLC, and include a check for any tax payment due with the Certificate of Cancellation and a $200 filing fee.
Why Dissolve an LLC in Delaware?
There are many instances where dissolution is good for your LLC, for example, when you no longer want to operate the LLC or want to pursue another business venture. Note that if you’re a visa holder who created an LLC, you don’t need to dissolve a Delaware LLC that is still in use or has a business purpose, even if you’re no longer in the US.
Common examples of why you might close a Delaware LLC include:
- You created an LLC for a rental property and sold the property.
- You created an LLC for an online business that you no longer operate.
- You created an LLC with the intention of starting a business but never started.
- The business has merged with another company, and the LLC is no longer needed.
Generally, business owners may choose to dissolve a Delaware LLC because of:
- Loss of business viability
- Moving on to other business opportunities
- Closed business activities
- Limitations to business operations in the US
How to Dissolve an LLC in Delaware in 6 Steps
To dissolve an LLC in Delaware, you’ll need to follow the steps outlined in the company’s operating agreement as an owner of the LLC. You’ll need to complete the winding-up process for business assets and liabilities and then formally record the decision with the Delaware Division of Corporations. Follow the steps below to get started.
1. Review Your LLC’s Operating Agreement
Understanding the specific dissolution procedures outlined in your LLC’s operating agreement is essential. It will typically include key information on members’ ownership of the LLC and their voting rights. It will also specify the signatures, voting, or other procedures required to dissolve the LLC.
2. Vote to Dissolve an LLC
You will then need to convene a meeting with all LLC members to discuss and approve the dissolution decision. Based on guidelines outlined in the operating agreement, this can be done online or in person and may require unanimous agreement.
3. Notify Tax Agencies and Pay Remaining Taxes
Before filing the Certificate of Cancellation in Delaware, you must file all necessary tax returns, including income tax and employment tax returns, with the appropriate tax authorities. You can also contact the Delaware Department of State, Franchise Tax Section concerning any due taxes. Consult with a tax professional to accurately complete these filings.
4. File Articles of Dissolution
You won’t need to file a dissolution form with the state to dissolve an LLC in Delaware. However, you need to record the decision to dissolve in writing and then file a Certificate of Cancellation. Delaware provides a sample template you can use.
Delaware requests that you include a cover letter with your name, address, and telephone or fax number to help it contact you if necessary. If you have any questions about the filing, contact the Delaware Department of State Division of Corporations at (302) 739- 3073.
5. Wind Up Other Business Affairs
Winding up the business is the final step in officially closing the LLC. This includes paying off debts and creditors, closing accounts, and distributing any remaining assets to the LLC members.
Winding up can include:
- Paying any remaining bills
- Paying off debts
- Paying creditors and credit cards
- Notifying customers, clients, and vendors
- Issuing final paychecks to employees
- Discussing severance packages or other options with employees
- Canceling business licenses or registration
- Paying final outstanding balance of Delaware LLC franchise tax (if you haven’t done this already)
- Closing business bank accounts
- Canceling business credit cards
- Informing creditors of business cancellation
- Informing and canceling a Delaware registered agent service
6. Distribute Remaining Assets
The LLC operating agreement outlines the distribution of assets, including the percentage of ownership of each member. Once all debts, obligations, and tax liabilities have been settled, distribute the remaining assets and profits among the LLC members according to the agreed-upon terms to finalize the company dissolution.
How Much Does It Cost to Dissolve an LLC in Delaware?
It costs $200 to file a certificate of cancellation of an LLC in Delaware. You can request a certified copy for an additional $50. Expedited services are also available for an additional fee.
Should I Dissolve My LLC Myself or Hire an LLC Dissolution Service in Delaware?
You can choose to dissolve an LLC yourself or get a professional to save time and hassle. If the LLC has outstanding debt, taxes to file, or significant physical assets to distribute or sell as part of the dissolution process, getting professional help can simplify the process.
The support of a tax professional, lawyer, or professional dissolution service can provide the expertise and support you need. Even with a simple dissolution, tapping into professional assistance can facilitate the process.
How doola Can Help You Dissolve a Delaware LLC
When wrapping up business operations, dealing with employees, and other obligations related to closing a business, dissolution paperwork can become a hassle. doola offers customized LLC dissolution services so you can focus on more important things.
To get started, you just need to create an account, and doola will collect basic information about your company. Then, it will prepare the Delaware certificate of cancellation and get back to you with any additional required information.
When Delaware officially confirms the cancellation is complete, doola will let you know immediately and forward the stamped copy of your submitted document. Get doola LLC dissolution to save time!
How long does it take to dissolve an LLC in Delaware?
It typically takes two to four weeks to receive confirmation that an LLC has been canceled in Delaware. Expedited service is available with one-hour, two-hour, same-day, or 24-hour processing for an additional fee.
Can I dissolve my LLC without notifying my members in Delaware?
You must notify members and follow all procedures outlined in your LLC’s operating agreement for dissolution. In Delaware, this generally includes putting into writing the agreement by all members to dissolve the LLC.
Can I dissolve my LLC if I have pending lawsuits in Delaware?
No, you cannot dissolve an LLC with pending lawsuits in Delaware. Before officially canceling the Delaware LLC, the company must pay all debts and liabilities, and the LLC cannot have lawsuits pending.
Can I cancel my EIN once my LLC is dissolved in Delaware?
You can’t cancel an EIN, but you need to inform the IRS to close the business account. You can send a letter to the IRS with the complete legal name of the entity, the EIN, the business address, the reason you wish to close your account, and a copy of the EIN Assignment Notice issued with your EIN. Find more on canceling your EIN here.
What happens if I don’t properly dissolve my LLC in Delaware?
If you don’t properly dissolve a Delaware LLC, you could be held personally liable for unpaid debts or taxes of the LLC. You will also need to pay annual filing fees or face potential fines.
Can I reopen a dissolved LLC in Delaware?
Yes, you can reopen a dissolved LLC in Delaware. You’ll need to file the Certificate of Revival with the Delaware Division of Corporations. To reopen a Delaware LLC, you’ll need to pay any owed taxes and fix the issues that led to your Delaware LLC dissolution.