If a Delaware LLC fails to meet its statutory requirements, it can be administratively dissolved – meaning its assets will be liquidated and distributed among creditors.
To avoid this scenario, it’s essential that you pay your franchise tax and file any outstanding federal taxes as soon as possible. Furthermore, closing bank accounts and licenses is also key.
Vote on the dissolution.
An LLC may be dissolved through a vote by its members. This can take place through various methods, such as at an annual meeting vote. Or it can be initiated by certain trigger events.
This event may be stated in either the operating agreement or other documents such as bylaws. When this happens, an LLC must cease doing business, wind up its affairs, and distribute any remaining assets amongst its members.
Effective dissolution requires following certain steps carefully in order to avoid incurring costly fines and penalties, such as settling all accounts, closing any bank or revenue authority accounts and filing your final federal tax return.
Close bank accounts and cancel other licenses.
Whenever closing an LLC in Delaware, it is essential to close all bank accounts and cancel other licenses in order to avoid potential conflicts or disputes arising when closing down your business. This will also prevent any unanticipated challenges from arising when concluding your business dealings.
As an LLC member, it is also wise to keep its assets separate from your personal accounts – this way if your LLC is sued, any legal proceedings would only touch on its assets instead of also impacting personal ones.
Make sure to file a final federal return with the IRS to ensure you’re no longer responsible for payroll/employment taxes and can deactivate your LLC’s EIN.
Final steps towards closing your company include filing a Certificate of Cancellation with the state. This can be completed online, by mail or in person and usually costs $200 with expedite fees incurred if necessary.
Pay your company’s taxes.
As part of setting up your Delaware LLC, it’s essential that all applicable taxes and fees are covered – this may include gross receipts tax and income tax depending on the nature of your business type.
When your company is ready to shut down, filing its dissolution or cancellation with the Delaware Division of Corporations is your next step. They accept these documents both via mail and online submission.
Alternately, you could hire an attorney to assist with filings. UpCounsel offers such attorneys from leading law schools such as Harvard Law and Yale Law to make this process simpler for you.
After you establish an LLC, it’s advisable to open bank and credit accounts for it as this will protect both personal and business assets from lawsuits from the business. Furthermore, an EIN (federal employer identification number) might be needed if there are employees working at your LLC.
Send an advance notice to creditors.
If your LLC has multiple creditors, it may be prudent to send them advance notification prior to dissolving it in order to enable them to pursue any claims should the entity ultimately disband. This will give creditors enough time to file claims if needed when it finally disbands.
If you need assistance writing an advance notice, there are numerous resources online which can provide assistance. Furthermore, tax professionals are often the best people to consult on how best to tackle this step in the process.
Delaware does not mandate sending advance notice to creditors, but business owners should take the initiative and be aware of this process to save both time and money in the long run. This can help save both your time and energy!
As previously stated, state regulations stipulate that an LLC cannot be administratively dissolved by the Secretary of State until all obligations to them have been fulfilled – this includes filing annual reports and paying all necessary fees. Otherwise, the state could dissolve it administratively.
