Delaware Certificate of Cancellation

A Delaware Certificate of Cancellation is a legal document you will submit to the state of Delaware when you wish to formally dissolve your LLC.

Countless tasks must be performed to close an LLC in Delaware, including dissolving and winding up the business. The process of ending an LLC that has been registered in Delaware begins with dissolution, which protects the former LLC from claimants and creditors.

Section 18-801 of the Delaware Limited Liability Company Act explains how a Delaware LLC can complete the process of dissolution.

LLCs can be dissolved voluntarily by a vote of LLC members or involuntarily through a court decree. When a business owner wishes to dissolve an LLC, they should first check their LLC agreement, which will usually contain rules for starting the process of dissolution. Generally, dissolving an LLC will require members to vote on a resolution, and if a certain percentage of members vote in favor of the resolution, the LLC will be dissolved. It is important to follow all procedural requirements when dissolving an LLC, including the rules that mandate how to schedule the vote.

The Delaware LLC Act provides an alternative dissolution method that can be used unless it conflicts with the LLC agreement. In this alternative dissolution method, an LLC can be dissolved if two-thirds of owning members vote to end the LLC. Whichever dissolution method is chosen, the decision to dissolve should be officially recorded in the minutes of the dissolution meeting.

After dissolution has been approved, the LLC will continue to exist until all remaining matters, including winding up the company, have been completed. The owner of the business is allowed to choose one or more LLC members to wind up the company.

Winding up tasks in Delaware include:

  • Defense and prosecution of lawsuits.
  • Closing the business of the LLC.
  • Disposing of the LLC's property.
  • Making reasonable provisions for any outstanding liabilities.
  • Providing members with the remaining assets of the LLC.

Under the LLC Act, there are certain rules for handling outstanding liabilities. The LLC must:

  • Pay, or make a reasonable attempt to pay all claims against the company.
  • Make provisions to pay compensation for claims that are the result of a lawsuit against the LLC.
  • Establish provisions for paying claims that are not yet known to the LLC, but may become known within 10 years after the company has been dissolved.

A range of possible claims is named in the LLC Act, meaning companies should review these rules very carefully before dissolving.

There is a particular order in which a business owner must make distributions and discharge liabilities:

  • Creditors, including LLC members, must be first.
  • Unless it is prohibited by the LLC agreement, current and former LLC members should be paid next.
  • Lastly, the business owner should distribute assets to LLC members that account for their initial contributions to the LLC.

Once an LLC is dissolved, it cannot do any business unrelated to winding up. Before a Delaware Certificate of Cancellation is filed, a company must finish winding up its affairs.

A $125 late fee will be charged if an LLC is dissolved incorrectly, and any owed taxes must also be paid. There will be a continuing 1.5 percent interest rate applied to penalties and business taxes until the LLC is dissolved correctly. If the business owner decides to reform their LLC, there will be a $200 revival fee.

Winding up and dissolving is only the first part of the process of ending a Delaware business.

On either the Delaware Division of Corporations or Secretary of State websites, businesses can find:

  • Necessary forms.
  • Mailing addresses.
  • Required fees.

After a business has been canceled, its former name will be available for use by other Delaware businesses. Within three years, an LLC is allowed to cancel its dissolution. Before the dissolution can be revoked, however, the business should make sure that their former name is not being used by another corporation. If an LLC wants to reform after being administratively voided, but their name is not available for use, the business name must be changed. Also, an amendment form should be filed with the Department of State, and any required fees should be paid.

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