Delaware LLC Dissolution Form: Everything You Need to Know
A Delaware LLC dissolution form is one of several items necessary for closing your LLC if it was formed in Delaware. 3 min read
2. What If You Change Your Mind?
3. What If You Don't File a Certificate of Cancellation?
4. Dissolving Multi-Member LLCs
A Delaware LLC dissolution form is one of several items necessary for closing your LLC if it was formed in Delaware.
If you wish to dissolve your LLC, you need to consult the Delaware LLC Act's dissolution section. In the state of Delaware, if your LLC is in good standing, its existence is considered perpetual unless a dissolution date is specified in the LLC's operating agreement or certificate of formation. Falling out of good standing is the result of failing to pay franchise tax, not maintaining a registered agent, or submitting a certificate of cancellation.
Dissolution is a formal process. There are two ways to dissolve an LLC: involuntarily, as the result of a court decision, or voluntarily, by the members of the LLC. Doing this ends its existence officially and puts its assets out of reach by creditors.
How to Dissolve Your Delaware LLC
To dissolve an LLC formed in Delaware, you need to take the following steps:
- Complete a Certificate of Cancellation and send it to the Department of State. This can be done by mail, in person, or by fax. You also need to include a $200 fee for filing.
- On the certificate, include information about your LLC such as its name, date of formation, and what date you wish the cancellation to be effective.
- The certificate of cancellation does not need to be notarized but must be signed by all LLC owners/members.
- Include a Filing Cover Memo with your contact information in case they need to call you or send an item by mail.
- Submit your final withholding and income tax returns, checking “out of business” on both of them, and provide proof that you paid the taxes.
- Contact the Franchise Tax Section at the Department of State regarding any other taxes that may be due.
What If You Change Your Mind?
After your LLC is dissolved, it may no longer do business. The name is free for use by another company. If you change your mind, your LLC can reverse the dissolution filing within three years of the date of cancellation, but if you want the same name, you will need to make sure it is still available to you. Otherwise, you must file a form to make an amendment along with a filing fee with a different name for the LLC.
If you do reinstate your LLC, you will need to pay a late fee for any missed annual reports, along with any taxes that may be due. Any amounts due are subject to a 1.5 percent interest rate, and you will also need to pay a $200 fee to revive your company.
What If You Don't File a Certificate of Cancellation?
An LLC that does business in other states must file separate forms, with associated fees, to terminate your registration there. This form may be called by a different name, such as a certificate of surrender or application of withdrawal. If this is not done, you will be charged penalties and taxes every year, and are still expected to file annual reports.
Delaware will also continue to charge a franchise tax each year. This tax is not affected by the LLC's income or business activity. It must pay franchise tax even if it did not generate income that year. The business is also liable for any back taxes, penalties, and interest. Delaware does not pro-rate franchise tax. Therefore, if the LLC is not canceled before January 1, it must pay the entire franchise tax for the year.
Dissolving Multi-Member LLCs
Your LLC's operating agreement should cover guidelines for dissolving the LLC voluntarily. Usually, this requires that the LLC members vote on the dissolution, and a specified percentage of members must vote in favor for dissolution to take place. Be sure to give plenty of advance notice to members for the meeting, along with setting a specific time and place to meet for this vote.
If the rules are not specified in the operating agreement, Delaware provides an alternate method. You must obtain written consent or an in-person affirmative vote of members owning over two-thirds of the company's profits. Either way, you need to document the decision in officially recorded minutes from the meeting, or on a written consent form.
If you need more information or help with dissolving a Delaware LLC, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.