Key Takeaways

  • To close a Delaware LLC, you must dissolve the company, complete the winding-up process, and file a Certificate of Cancellation with the Delaware Division of Corporations.
  • The winding-up process includes settling debts, liquidating assets, and distributing remaining funds to members in the correct legal order.
  • Delaware law under Section 18-801 of the LLC Act allows voluntary or judicial dissolution, depending on the situation.
  • LLCs must pay all state taxes and annual franchise fees before filing for cancellation to avoid penalties and interest.
  • Certain circumstances—such as member disputes or deadlocks—may require court involvement in dissolution proceedings.
  • The Delaware Court of Chancery has the authority to oversee complex or contested dissolutions.
  • Filing the Certificate of Cancellation formally ends the LLC’s legal existence and releases it from future tax obligations.

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.

Reviving a Delaware LLC After Cancellation

If you later decide to reopen or reinstate your Delaware LLC, you may be able to do so within three years of the cancellation date. This process involves filing a Certificate of Revival with the Delaware Division of Corporations and paying a $200 revival fee plus any outstanding taxes or penalties.

Keep in mind:

  • The original LLC name may no longer be available. If it has been taken, you must select a new name.
  • All previous members must consent to revival unless otherwise specified in the operating agreement.
  • Upon approval, the LLC regains its prior rights and obligations, effectively continuing from where it left off.

Reviving an LLC can be useful if the business environment changes or if you wish to reclaim assets or intellectual property previously held by the dissolved entity.

Tax and Reporting Obligations Before Cancellation

Before filing a Delaware Certificate of Cancellation, LLCs must ensure they are current on all state filings and taxes. The Delaware Division of Corporations will not approve the cancellation if unpaid franchise taxes or penalties remain outstanding.

Important pre-cancellation requirements include:

  • Annual Franchise Tax: Must be paid through the year of dissolution.
  • Final Tax Returns: Federal and Delaware returns should reflect the date of dissolution.
  • Registered Agent Fees: If your agent bills annually, ensure these are settled or canceled.
  • Out-of-State Registrations: If your Delaware LLC operates in other states, file withdrawal forms in those states to prevent ongoing reporting obligations.

Once these steps are complete, submit the Certificate of Cancellation with the $200 filing fee. Failure to follow these requirements could result in continued tax liability and penalties even after the business has ceased operations.

Judicial Dissolution and Member Deadlock Situations

While most LLC dissolutions are voluntary, some require court intervention. Under Section 18-802 of the Delaware LLC Act, the Delaware Court of Chancery can dissolve an LLC when it is no longer reasonably practicable to carry on its business in conformity with the operating agreement.

This often happens in cases of deadlock—when equal members disagree on major decisions, making it impossible to move forward. Examples include:

  • Two equal members cannot agree on management or financial decisions.
  • The business purpose has been fulfilled or become impossible to achieve.
  • Fraud, misconduct, or mismanagement makes continued operation unreasonable.

In such cases, a member may petition the Delaware Court of Chancery to appoint a liquidating trustee. The trustee oversees the winding-up process, ensuring assets are liquidated fairly, creditors are paid, and distributions comply with Delaware law.

Court-supervised dissolution protects all parties’ rights and ensures transparency during the closure of the LLC, especially when members have equal ownership or conflicting interests.

Steps to Close a Delaware LLC

To close a Delaware LLC, business owners must complete several legal and administrative steps. This process ensures the LLC’s affairs are properly concluded and its legal status is terminated under Delaware law. The main stages include:

  1. Vote to Dissolve the LLC
    Dissolution typically begins with a vote of the members as outlined in the operating agreement. If no agreement specifies a procedure, Delaware’s Limited Liability Company Act allows dissolution upon the affirmative vote of members owning two-thirds of the LLC interests.
  2. Cease Business Operations
    Once dissolution is approved, the LLC must stop conducting new business activities except those necessary to wind up its affairs. The company continues to exist legally only for that purpose.
  3. Notify Creditors and Settle Debts
    Delaware requires that all creditors be notified and that the company pay off its obligations. This step prevents future claims against members. Businesses should document all payments made to creditors for record-keeping purposes.
  4. Liquidate Assets and Distribute Remaining Funds
    After debts are paid, remaining assets should be distributed to members in proportion to their ownership interest or as directed by the operating agreement.
    • First: Pay creditors (including members who are creditors).
    • Second: Pay any members owed distributions.
    • Third: Distribute remaining assets according to capital contributions.
  5. Obtain a Tax Clearance
    Before filing a Certificate of Cancellation, ensure that all franchise taxes, annual fees, and other obligations to the Delaware Division of Revenue are satisfied.

  6. File the Certificate of CancellationThis final filing ends the LLC’s existence. The Certificate must include:

    • The name of the LLC
    • The effective date of cancellation (if not immediate)
    • Confirmation that all debts and liabilities have been settled

    The filing fee is typically $200, and it can be submitted online or by mail to the Delaware Division of Corporations.

Frequently Asked Questions

  1. How long does it take to close a Delaware LLC?
    Processing a Certificate of Cancellation generally takes 2–3 weeks by mail or a few days if filed online, depending on state processing volume.
  2. Can I close my Delaware LLC if I owe back taxes?
    No. All state taxes and franchise fees must be paid before filing for cancellation. Otherwise, your LLC will remain in “void” status and continue accruing penalties.
  3. What happens if members disagree on closing the LLC?
    If members cannot agree, one may file a petition for judicial dissolution with the Delaware Court of Chancery to resolve disputes and appoint a liquidating trustee.
  4. Is there a difference between dissolving and canceling an LLC?
    Yes. Dissolution begins the process of winding up the company’s affairs, while cancellation formally ends its legal existence with the state.
  5. Can I reopen my LLC after cancellation?
    Yes, Delaware allows revival within three years by filing a Certificate of Revival and paying applicable fees and taxes.

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