Dissolving an LLC in Delaware: Everything You Need to Know
Dissolving an LLC in Delaware is the act of officially bringing an end to your limited liability company in the state of Delaware.3 min read
Dissolving an LLC in Delaware—or “cancellation,” as it is officially referred to in that state—is the act of officially bringing an end to your limited liability company in the state of Delaware. Doing so in Delaware will involve several tasks, the two main ones being dissolving your business and winding it up.
How to Dissolve a Delaware LLC
In order to dissolve your Delaware LLC, the first thing you should do is consult your LLC operating agreement. If it has been drawn up correctly, it should have a section that deals with how to dissolve your LLC. In most cases, the LLC members will be required to vote for dissolution with a majority in favor for it to pass. When calling such a vote, you should be careful to adhere to any stated requirements regarding it, such as where and when the vote will occur and what advance notice is necessary.
Additionally, unless otherwise stated by your LLC operating agreement, Delaware’s LLC Act provides for an alternative dissolution method in the form of a vote or written consent of two-thirds of the LLC members in favor of dissolution. Regardless of the method of dissolution you pursue, the results that they yield should be recorded, either in the minutes of the meeting for dissolution or in a written consent form.
Once dissolution has been agreed upon, you must file a Certificate of Cancellation of a Limited Liability Company with the Secretary of State in person, by fax, or by mail. However, this should not be done until creditors have been paid, operations have ceased, and all other affairs related to the LLC have been taken care of, the collective term for which is winding up.
How to Wind Up an LLC in Delaware
Winding up is the process of resolving certain final tasks related to your LLC after your LLC has agreed to dissolution. These tasks may be designated to one of your LLC managers or members or to several of them. Such people are referred to as liquidation managers, and some of the actions they will be tasked with under Delaware’s LLC Act include:
- Defending and prosecuting lawsuits.
- Closing and selling the LLC’s business.
- Dispersing the LLC’s property.
- Discharging the LLC’s liabilities.
- Distributing any remaining assets to LLC members.
Insofar as discharging the LLC’s liabilities is concerned, in accordance with Delaware’s LLC Act, the LLC must:
- Pay or make a reasonable provision to pay any obligations or claims, including any unmatured, conditional, or contingent contract claims, related to the LLC.
- Make provision to compensate any claim against the LLC that pertains to a pending legal action, proceeding, or lawsuit.
- Make provision to compensate any claims that are not currently held against the LLC but which may arise up to 10 years after dissolution.
Insofar as distributing the LLC’s assets is concerned, there is a particular order in which this is to be done. That order is:
- First, creditors must be paid, including creditors who are LLC members.
- Next, former and current members should be paid distributions, unless your LLC agreement has a provision against it.
- Last, all remaining assets should be distributed to members and/or former members in proportion to what their share of distributions would normally be, unless your LLC agreement has a provision against it.
How to File a Certificate of Cancellation
Once all your winding up tasks are complete, you can then file your Certificate of Cancellation with the office of the Secretary of State. Information listed on this certificate should include:
- The LLC’s name.
- The date the LLC’s Certificate of Formation was filed.
- The date of cancellation if it will not occur on the date of filing.
The filing fee for this certificate is $200. You can also include a Filing Cover Memo with your address, name, and phone or fax number if you wish to be contacted by the Secretary of State. All these items, in addition to your Franchise Tax payment (if necessary), can be mailed to:
Delaware Division of Corporations
401 Federal Street – Suite 4
Dover, DE 19901
If you are fax filing, the above items can be faxed with the following number: 302-739-3812. If fax filing, your credit card number must be provided on the Cover Letter, as checks are not accepted.
If you need help further understanding the process of dissolving an LLC in Delaware, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.