What Is Delaware Dissolution?
When your company originally registered with the state, it had to undergo a process and file the necessary documents. The same is true when it comes to closing a company. When it’s time for your company to end its operations, you’ll have to undergo the process of dissolution.
Why Does A Company Dissolve?
Why do companies need to dissolve? – Delaware requires business entities to file documents to close their company formally. Properly dissolving your company will inform the state that it will no longer have to file reports and pay taxes.
Who makes the decision to dissolve? – LLC members need to agree to dissolve. Meanwhile, corporations should hold a shareholder vote based on a resolution that the board of directors has adopted.
How long does it take to dissolve a business? – It may take weeks for your company to complete the whole process. However, the time frame may vary depending on how long it takes for your company to complete all steps. The state usually takes 2-4 weeks to process Delware dissolution filings. You may expedite the processing time with the state to speed up the process by paying for expedited service.
What Happens If Your Company Does Not Formally Dissolve?
Deciding to close your business doesn’t automatically mean you’ll no longer have obligations. Your company will remain registered with the state as an active business until you file for Delaware dissolution or cancellation. Thus, your company will be subject to annual report late fees of at least $125 in addition to due taxes. Additionally, the state will charge 1.5% interest for every month your company fails to pay.
Steps To Dissolve Your Business
Follow these steps to ensure that you properly and formally complete Delaware dissolution.
1. File Certificate of Cancellation or Dissolution with the state – Delaware LLCs have to submit a Certificate of Cancellation, and corporations have to fill out a Certificate of Dissolution. A corporation can use the dissolution Short Form if it hasn’t started conducting business or issued any stock.
File the form with the Department of State along with the filing fee and a Filing Cover Memo, which includes your name, complete address, and telephone or fax number.
2. Remove all liabilities and obligations – Under state law, business entities in Delaware need to do winding up tasks. These include the following:
- prosecute or defend all types of lawsuits
- disposal and conveyancing of properties
- remove liabilities or making provisions to pay them
- distribution of remaining assets
3. Give notice to any claimants – This step is an optional task. However, it’ll help in limiting your liability while allowing your company to distribute its assets safely. You can send a written notice to all known claimants or publish it in a newspaper. Make sure the notice includes information on where and until when they can send claims.
4. Tax clearance – Since the Department of State also handles franchise taxes, your company won’t need to secure a tax clearance. However, you should contact the Franchise Tax Section regarding the exact amount of taxes due at the time of the cancellation or dissolution of your company. Corporations need to pay all final franchise taxes before filing the dissolution. LLC’s are able to pay all franchises taxes with the Certificate of cancellation. The fees being paid can be outlined on the filing cover memo that is submitted with filing to the state.
5. Close all bank accounts, credit lines, permits, and licenses – Use all funds to settle the company’s obligations. After the formal dissolution, you’ll no longer be able to use the company bank accounts even if you start a new business venture. So, it’ll be better to close them. You can also protect your finances and reputation by canceling all the permits and licenses of your company.
How DoMyLLC can assist with streamlining the process
Getting to the decision of closing your company was a hard journey. However, that’s not the end. You’ll need to go through the Delaware dissolution process. If you need help, you can rely on our team of experts. We also provide personalized solutions fit for your company’s needs. Contact DoMyLLC now and find out how you can benefit from our services.
Delaware Dissolution FAQs
Is There A Filing Fee To Dissolve The Business?
LLCs need to pay $200 for the filing of the Certificate of Cancellation. Corporations, on the other hand, have to pay either $10 for the short form or $204 for the Certificate of Dissolution. An additional fee applies for expedited services.
- $1000 for the 1-hour service
- $500 for the 2-hour service
- $200 for the same-day processing
- $100 for 24 working hours
Do You Need The Department Of Revenue Clearance Before The Secretary Of State Will Accept Your Dissolution?
No, your company won’t need clearance, however the taxes must be paid at the time of filing.
How Long Does The State Take To Process The Dissolution?
It’ll take the state approximately 2-4 weeks to process dissolution filings. However, you can request expedited service. Choose among the one-hour, two-hour, same-day, or 24-hour service.
When Can Another Business Use Your Company Name?
Other business entities can request your company name as soon as your business is officially dissolved.