Cancel Delaware LLC: Everything You Need to Know
To cancel a Delaware LLC you have to know the steps. The process is fairly simple and it can be completed when you decide to dissolve an LLC in Delaware. 3 min read
To cancel a Delaware LLC you have to know the steps. The process is fairly simple and it can be completed when you decide to dissolve an LLC in Delaware. Ending a business existence and removing it from the reach of creditors and claimants starts with the process of dissolution.
Steps to Dissolve a Delaware LLC
To voluntarily dissolve an LLC the members should read the LLC agreement. It should contain a section with instructions on how to dissolve the LLC. These are some of the common steps:
- The rules usually require the members to vote on a dissolution resolution and for a specified percentage of members to vote in favor.
- There are procedural rules that must be followed regarding the dissolution vote and meetings regarding the process.
- The first step is to call a members meeting.
- If more than two-thirds of the members agree, there is a law in Delaware that says that they can dissolve the LLC by giving notice to the other members.
After the dissolution, the LLC remains in form only to wrap up final business. The owners may hire people to manage the closing affairs of the business. This is also known as "winding up."
In Delaware, the LLC Act states that winding-up tasks may include:
- Prosecuting and defending against lawsuits;
- Settling and closing accounts and other matters of the LLC's business;
- Conveying, selling, or disposing of the LLC's property;
- Discharging of, or making provision to reasonably handle the LLC's liabilities;
- Distributing the remaining assets of the LLC to the remaining members.
When it comes to disposing of your LLC's liabilities, the LLC Act states specifically that the LLC:
- Shall pay or make arrangements to settle all claims or obligations, including contingent, conditional, and contractual claims which have not yet matured;
- Shall make provisions to provide compensation for all claims against the LLC which are currently pending;
- Shall settle any suit or proceeding to which the LLC is a party;
- And, shall provide compensation for claims unknown to the LLC that have not arisen yet, but are likely to arise within 10 years of the dissolution date.
When it comes to discharging the responsibilities of your LLC, you have to do things in a particular order. The order is usually:
- The LLC must pay all taxes and creditors, including members of the LLC who lend money to the entity.
- Then, the company must pay interim dividends that the LLC agreement requires the company to pay to the LLC.
- Finally, the LLC must distribute any assets that remain to members and former members. First, for the return of contributions to the LLC. Then, according to the company's normal method for distributing any profits.
Canceling Your Delaware LLC
You can file the Certificate of Cancellation for your Delaware LLC with the secretary of state after winding up your LLC. A few pieces of basic information are required when you file the Certificate of Cancellation, including:
- The name of the LLC;
- The LLC's Certificate of Formation filing date;
- And, the date the cancellation is effective; if different than the filing date.
You use the Certificate of Cancellation to cancel your LLC's Certificate of Formation. The Certificate of Cancellation form costs $200 to file. The entire filing process usually takes two to three weeks. If you are willing to pay a little more there are expedited services available. You can download a basic Certificate of Cancellation on your secretary of state's website. After the cancellation is complete, the name is available for others to use.
All franchise taxes must be paid for the company to complete dissolution, including franchise taxes. Franchise taxes are paid to the Delaware Division of Revenue. The proofs of payment must be submitted with the dissolution documents that are filed with the secretary of state. The final income tax and withholding return must also be filed to handle all sales tax obligations and to indicate the company is no longer in business on each of the forms.
Forms must also be filed with the Delaware Corporations Division. A cover memo and the Certificate of Cancellation form must be filed together and contact information must be on the memo. All of the forms are then filed at the address on the secretary of state's form. LLCs in Delaware are not required to get tax clearance before dissolution. However, when it comes to the IRS the LLC must follow instructions for completing a “final return.” If the business is registered in multiple states, the process has to be completed in each state.
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