Delaware Certificate of Cancellation LLC: Everything You Need to Know
A Delaware LLC certificate of cancellation is issued by the state to officially terminate the existence of a limited liability corporation in a process called dissolution.3 min read
Delaware LLC Dissolution
A Delaware LLC certificate of cancellation is issued by the state to officially terminate the existence of a limited liability corporation in a process called dissolution. Dissolving a corporation prevents claimants and creditors from collecting on outstanding obligations. In Delaware, the terms cancellation and dissolution are used interchangeably.
To dissolve your Delaware LLC, you'll first need to contact the Delaware Franchise Tax Section to determine if any state franchise tax payments are outstanding. This is an annual fee that does not depend on the income of the LLC. Even if your LLC did not generate any income during a specific year, you are still responsible for the franchise tax as well as accrued penalties, interest, and back taxes. This means that if you don't cancel your LLC with the state by filing a certificate of cancellation, you will owe the annual tax every year, even if you aren't doing business. If this step is not taken, the LLC will be automatically dissolved when your franchise tax enters arrears. When this happens, you will no longer accrue the annual franchise tax. However, you will have to pay the back taxes and fees if you ever plan to bring your LLC into good standing again.
Franchise tax and related debt must be paid before an LLC can be officially dissolved. If you cancel your franchise after Jan. 1, you will owe franchise tax for the whole year. This amount can be paid online with your credit card or by mailing a check. You must enter the business entity file number of your LLC. The receipt should be printed and attached to your certificate of cancellation. Checks should be made payable to the Delaware Secretary of State and mailed with your certificate of cancellation. You can also mail a cover letter with your credit card information with a note authorizing the office to charge the card for outstanding franchise tax. You must also send the filing fee of $200 along with the certificate of cancellation. If a certificate of cancellation is erroneously entered, you must file a certificate of correction to restore the LLC's good standing.
The certificate of cancellation need not be notarized and does not require original signatures. The cancellation typically takes two or three weeks to process. However, you can request expedited processing at an additional cost of:
- $100 for 24-hour service
- $200 for same-day processing
- $500 for two-hour processing
- $1,000 for one-hour processing
In addition to filing the certificate of cancellation, you should review the rules for dissolution in your LLC operating agreement. In most cases, a certain percentage of members must vote in favor of a resolution to dissolve the company. Closely follow any procedural requirements related to this vote, such as providing advance notice of the meeting time and place for the vote. LLCs without operating agreements in place should abide by Delaware law, which states that the vote or written consent of members who own more than two-thirds of the company is needed to voluntarily dissolve an LLC. The decision to dissolve the LLC must be recorded in official meeting minutes or with a written consent form.
You will also have to file a final tax return if your LLC conducted business in the state. In addition to outstanding tax debt, you must pay a late fee of at least $125, if applicable. Your taxes are subject to 1.5-percent interest until your LLC is officially canceled and your debts settled.
Once your LLC is officially canceled by the Delaware Secretary of State, another business can request to register your company name. You have three years after filing the certificate of cancellation to request revocation of the dissolution, but you do not retain rights to the business name during that time. If you want to bring your LLC back to good standing and the name has been taken by another business, you must change the name and file an amendment to that effect along with a $200 filing fee.
You may want to designate one LLC member to take responsibility for wrapping up the company's final business, such as disposing of property and distributing assets.
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