A Delaware limited liability company (LLC) is a useful business entity, but there may come a time when you need to know how to dissolve an LLC in Delaware. The procedure is not complex and can be easily wrapped up when you choose to dissolve your Delaware LLC on a voluntary basis (if a court orders closure of the company, a different procedure is necessary).
Voting to Dissolve
The first step to dissolve an LLC Delaware is to call a meeting of the members. Your LLC agreement states the rules for how to dissolve a Delaware LLC, so check the agreement. Delaware law also allows dissolution when two-thirds of the members vote for dissolving a Delaware LLC. Members can vote in person or in writing. The vote should be recorded in the minutes. Once the vote passes, a manager has to be appointed to handle the Delaware LLC dissolution.
Winding Up Company Business
Creditors are paid first: all of the company’s bills must be paid and all of the Delaware Limited Liability Company members who are creditors must be paid back. Taxes also must be paid. Any lawsuits that are unresolved must be settled. Next, distributions owed to members must be paid. The manager must also create a plan to deal with any claims or lawsuits that may arise against the company in the future.
Once all the debts and responsibilities are resolved, members get their capital contributions back. Any remaining assets are then distributed among the members in proportion to their ownership shares.
The next step is to file forms and taxes with the Secretary of State. When dissolving an LLC in Delaware, the remaining franchise tax for the year must be paid before dissolution can be granted. The Delaware Division of Revenue collects this tax. You must obtain proof of payment of this tax and attach it with the dissolution paperwork you will file with the state. You also need to wrap up state taxes by filing the final withholding return and income tax return, indicating that the company is out of business on both forms.
The LLC in Delaware also must file forms with the Delaware Division of Corporations. Both the Cancellation form and the Corporate Certificate Cover Memo form must be filed. Make sure you include the contact information required in the cover memo form. Send the cover memo, cancellation form, and proof of franchise tax payment to the address listed on the forms. A $200 filing fee is required. The cancellation is processed in about two to three weeks after receipt, but expedited service is available. The certificate of cancellation can then be downloaded.
You do not need to pay federal taxes as part of how to dissolve a Delaware LLC with the state, but you will need to do it at some point. File a final return with the IRS (form 1065 or 1120 depending on how you are classified for tax purposes). If your Delaware LLC is registered in other states, you will need to follow the separate procedures required by those states as well in order to cancel the LLC there as well. Note that once the Delaware cancellation is complete, your business name becomes available to other people.
Dissolving an LLC in Delaware requires a few steps but can be relatively easy to achieve.
If you are ready to dissolve an LLC in Delaware, LegalZoom can help. Answer a few questions about your business and we’ll help you complete the paperwork you need.