How to Dissolve an LLC in Delaware

Sometimes business people find it necessary to dissolve LLC Delaware companies. While this form of LLC is often a preferred business entity, certain events can happen that require the company to be dissolved. 

Sometimes members feel that they should change the LLC to a corporation, or one of the partners leaves or dies. Whatever the reason for the business closing, you need to follow specific steps to avoid paying annual fees or taxes.

I can help you with any legal work for business people who wish to dissolve LLC Delaware companies. You can obtain my advice and assistance anytime. Simply email me at sam@mollaeilaw.com to get the legal support you need.

 

How Do You Dissolve LLC Delaware Businesses?

To learn how to dissolve LLC Delaware companies, you need to first fill out a certificate of cancellation. This form is completed with the Delaware Department of State.

You can complete the cancellation in person, at the office, by mail, or by fax. You should include the filing fee with the document.

It is also a good idea to include a filing cover memo when you fill out the certificate of cancellation. Add your name and contact details to the memo.

This will make it easier for the Department of State to call or email you, if necessary.

Read the LLC agreement first if you wish to voluntarily dissolve your LLC. Usually, the LLC agreement stipulates that LLC members must vote to dissolve the company. A certain percentage of members must be in favor of this resolution. 

I can help you find out what you need to do to dissolve your company. The process may be more involved than you expect.

Therefore, you will need my legal guidance during each step of the dissolution. Again, you can email me at sam@mollaeilaw.com for further information.

 

What Initial Process Must Be Followed When You Dissolve LLC Delaware Businesses?

When the initial process is begun to dissolve LLC Delaware businesses, members must follow the steps set out in the rules for dissolution. For instance, your members may need to meet at a specific time and vote for dissolution.

You may also need to give LLC members advance notice when planning the meeting.

In some cases, the operating agreement for an LLC may not feature the steps or guidelines for dissolution. If your operating agreement does not contain this information, the law in Delaware says that members need to provide affirmative consent or written approval for cancellation. 

The LLC Act of Delaware states that members who own over 66% of the ownership percentage need to give their consent.

What Should the Certificate of Cancellation Include When Owners Dissolve LLC Delaware Businesses?

When business people dissolve LLC Delaware businesses, they need to include specific information on the certificate of cancellation. These details must include the following:

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• The name of the LLC company
• The date when the certification of formation for the LLC was filed
• The effective date of cancellation if it is not the same as the filing date

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In effect, the certificate of cancelation cancels the LLC’s certificate of formation. You can easily download the certificate of cancellation from the Secretary of State’s website.

Members may vote in person or by casting their vote in writing. The voting outcome should be added to the meeting’s minutes. If the measure passes, the members of the LLC must appoint someone to manage the LLC’s dissolution. 

I can help you with managing the dissolution. You will need a top lawyer to help you through this process. Shoot me an email at sam@mollaeilaw.com today.

You should send the cancellation form and the cover memo along with proof of payment for the franchise tax on the address that is displayed on the cancellation form. Currently, the filing fee is $200.

 

How Does the LLC Act of Delaware Affect Company Closures When Owners Dissolve LLC Delaware Businesses?

According to the LLC Act in Delaware, an LLC may enjoy perpetual existence. The only time that the LLC will not receive this benefit is when the certificate of formation or the operating agreement does not permit it, or when managers dissolve LLC Delaware businesses by filing a certificate of cancellation. 

Delaware’s LLC Act permits you to affirmatively vote or provide written consent for dissolution – a consent that must be made by over two-thirds of the LLC membership.

 

Discharging LLC Liabilities

The LLC Act of Delaware has specific guidelines for discharging liabilities for an LLC. These guidelines state that the company must do the following:

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• Pay all claims and debts, including conditional, non-mature, and contingent contracts.
• Provide compensation for any claims made against the LLC, such as claims subject to a lawsuit, proceeding, or pending action to which the LLC is made a party.
• Provide compensation for claims that were not previously known by the LLC, or which may arise or become known 10 years after the LLC dissolves.

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As you can see, you should obtain legal assistance to make sure that all the liabilities are discharged correctly. I can help you with all the steps involved. Email me today about dissolving your Delaware LLC and avoid any problems with liability. Contact me at sam@mollaeilaw.com now.

 

How to Pay the Claims

To pay claims, you must follow a certain step-by-step process – 

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• First, you should pay the LLC creditors, including any members who are creditors. It is particularly important to pay any and all taxes.
• Next, you need to pay former LLC members any distributions that are due. These payments are usually approved and not related to dissolution. Unless your operating agreement says otherwise, you need to make the payments.
• Finally, unless the operating agreement disallows this action, you need to distribute the remaining assets to former members and current members in proportion to what they should receive.

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When Should You File the Certificate of Cancellation?

You should only file the LLC’s certificate of cancellation after the LLC has concluded all its business activities. The LLC can no longer do business once the certificate of cancellation has been officially filed.

 

When Managers Dissolve LLC Delaware Businesses, What Winding Up Activities for the Business Must Take Place?

Anytime businesses must take care of winding up activities, or when managers dissolve LLC Delaware businesses, the following activities need to take place:

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• The prosecution or defense of current lawsuits.
• The settlement and closing of the LLC’s business activities.
• The disposal of and conveyance of the LLC’s property.
• The discharge of LLC liabilities.
• The distribution of the remaining assets to the membership.

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You can see that the above activities need legal support. Send me an email if you need to dissolve your Delaware LLC or perform wind up activities for the business’s closing. Contact me at sam@mollaeilaw.com with your inquiries or concerns.

 

What Does the Law Say about Tax Clearance?

Delaware is different than other states, as it does not require that an LLC obtain tax clearance before the dissolution of the LLC. 

Note: When you file your tax form, check the final return box on IRS form 1065 for an LLC that is considered a partnership. If the LLC is classified as a corporation, check the “final return” box on the IRS form 1120.

 

Where Do Companies Get Additional Details When They Dissolve LLC Delaware Businesses?

Companies that dissolve LLC Delaware businesses can research dissolution by checking on the Secretary of State (SOS) website. I can assist you in making sure that everything goes well when you close your business. 

For example, you can use the following checklist and my guidance when you make the decision to close and dissolve. My email address, again, is sam@mollaeilaw.com.

 

Basic Checklist for Closing a Business

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• Collect outstanding accounts receivables – this should be done before you notify creditors about your decision to close
• Sell the inventory
• Inform creditors
• Notify customers 
• Terminate your commercial lease, or notify the landlord at least 30 days in advance
• Notify and pay your staff
• Liquidate the company’s assets
• Settle and pay off debts
• Make the ending federal-state payroll deposits
• Submit your final sales tax information and forms (these are due until the closeout date)
• Cancel all business subscriptions and credit cards
• Close your business’s bank account
• Cancel any permits or licenses
• File your final employment tax returns or IRS form 940 and IRS form 941 (state tax withholding and wage reporting documentation is included in this paperwork)
• File IRS form 4797, if you sell business assets, and submit IRS form 8594 as well
• Leave contact details with employees and business colleagues
• Dissolve the LLC

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What To Do Next

While most LLCs can wind up a business without filing bankruptcy, you may not be able to if you are carrying a heavy debt load. If so, I can also help you with this type of situation too. Email me, at your convenience, at sam@mollaeilaw.com.