To dissolve an LLC in Delaware, the members vote to end the company, wind up its business, pay the annual $300 franchise tax, and file a Certificate of Cancellation with the Delaware Division of Corporations for $220. Delaware calls this “cancellation” rather than dissolution, and the state filing is only part of it. You also need to close your Delaware tax accounts, file a final federal return, notify the IRS about the EIN, and withdraw the LLC from any other state where it was registered to do business.
Get Member Approval First
Nothing gets filed until the members formally approve the dissolution. Read the operating agreement before anything else. It may require a simple majority, a supermajority, or unanimous consent. If the agreement is silent, Delaware’s default rule applies: you need the vote or written consent of members who own more than two-thirds of the current interest in the LLC’s profits.1Justia. Delaware Code Title 6 Section 18-801 – Dissolution
Put the decision in writing. A resolution signed by the approving members should state the effective date of dissolution and name the person or group responsible for winding up the LLC’s affairs. That record protects you if a creditor, tax authority, or former member questions the process later.
Wind Up the Business
Once the vote passes, the LLC stops normal operations and enters the winding-up phase. Unless the operating agreement says otherwise, members owning more than 50 percent of the profits interest choose who runs the wind-up. That person or group can settle the business, sell assets, pay debts, defend or bring lawsuits, and distribute anything left over to the members.2Justia. Delaware Code Title 6 Section 18-803 – Winding Up
Pay Creditors Before Members
Delaware law sets a strict order for distributing what the LLC has:
- All liabilities are paid or reasonably provided for first, including debts owed to members or managers who are also creditors of the LLC.
- Any distributions that were owed to current or former members before the dissolution but not yet paid come next.
- Members then receive the return of their capital contributions, and finally share any remaining assets in proportion to their profit interests.3Delaware Code Online. Delaware Code Title 6 Chapter 18 Subchapter VIII – Winding Up
The operating agreement can rearrange the last two tiers. Where it doesn’t, the statutory order controls.
Close Accounts and Move Assets Out of the LLC’s Name
Everything held in the LLC’s name has to be closed or transferred: bank accounts, credit lines, merchant processing, and any live contracts. Banks generally want a filed copy of the Certificate of Cancellation and a signed member resolution before they’ll close accounts.
Handle intellectual property the same way. Trademarks, patents, domain names, and copyrights owned by the LLC need to be assigned to a member or sold before cancellation. If you skip that step, those assets end up with no clear owner, which makes them nearly impossible to enforce or transfer later.
Pay the Franchise Tax Before You File
Every Delaware LLC owes a $300 annual franchise tax, due each year by June 1.4Delaware Division of Revenue. Franchise Taxes The tax is assessed for any calendar year in which the LLC is active in the state’s records at any point between January 1 and December 31. There is no proration. Cancel in February and you still owe the full $300 for that year.5Delaware Division of Corporations. LLC/LP/GP Franchise Tax Instructions Late payment triggers a $200 penalty plus 1.5 percent monthly interest on the unpaid balance.
This is the step that trips people up. The Division of Corporations will not process a Certificate of Cancellation while any franchise tax balance is outstanding.6Delaware Division of Corporations. Division of Corporations Fee Schedule If the LLC has been inactive for years without paying, expect back taxes plus penalties and interest for every one of those years.
File the Certificate of Cancellation
The Certificate of Cancellation is what officially ends the LLC’s existence with the state. File it only after winding up is complete. Once the Division processes it, the LLC can no longer conduct business, sue, or be sued in its own name.
Delaware requires the certificate to include:7Justia. Delaware Code Title 6 Section 18-203 – Cancellation of Certificate
- The exact legal name of the LLC as it appears in the Division’s records.
- The date the original Certificate of Formation was filed.
- The name of each registered series whose certificate has not already been canceled, if any.
- A future effective date, if you want cancellation to take effect later rather than on filing.
An authorized member or manager signs it. The Division of Corporations posts a template on its site.8Delaware Division of Corporations. Certificate of Cancellation of a Limited Liability Company Include a cover letter with your name, address, and phone number so the Division can reach you about any problems with the filing.
The base filing fee is $220. Add $50 per registered series named in the certificate, and pay any outstanding franchise tax at the time of filing.6Delaware Division of Corporations. Division of Corporations Fee Schedule Submit by mail, fax, or through the Division’s online system; mailed checks go to “Delaware Secretary of State.” Expedited processing is available for an added fee, starting at $100 for 24-hour service and $200 for same-day service if received by 2:00 p.m. Eastern.9Delaware Division of Corporations. Expedited Services
Once the Division processes the filing, you’ll get back a stamped “Filed” copy. Keep it permanently. That’s the official proof the LLC was canceled.
Close Your State and Federal Tax Accounts
Filing the Certificate of Cancellation does not close your Delaware tax accounts. If the LLC conducted business inside Delaware, notify the Division of Revenue separately by checking the “Out of Business” box and entering your last day of operations on your final withholding or gross receipts tax coupon.10Delaware Division of Revenue. Dissolving a Delaware Corporation Skip this and the Division of Revenue can keep billing.
Federally, file a final return for the LLC’s last year. A multi-member LLC taxed as a partnership files Form 1065 and issues final Schedule K-1s. An LLC taxed as a corporation files Form 1120 or 1120-S. A single-member LLC reports final business income and expenses on Schedule C of the owner’s Form 1040. Check the “final return” box on whichever form applies. If the LLC had employees, file final employment tax returns (Form 941 or 944) along with a final W-2 for each employee and a W-3 transmittal.
Then write to the IRS to deactivate the LLC’s Employer Identification Number. The IRS does not actually cancel an EIN, since the number stays permanently tied to the entity, but it will close the account so no more filings are expected. Include the LLC’s legal name, EIN, mailing address, and reason for closing.11Internal Revenue Service. If You No Longer Need Your EIN
Withdraw From Other States
If the LLC was registered to do business outside Delaware, canceling in Delaware does nothing to those out-of-state registrations. Each state where the LLC qualified will keep expecting annual reports and fees until you formally withdraw. Left alone, those fees and penalties pile up in states where the LLC has no activity.
Pull your records, list every state where the LLC filed a foreign qualification, and file a certificate of withdrawal (some states call it a certificate of cancellation of authority) in each one, paying whatever that state charges. Some states assess late fees retroactively if the registration lapses without a formal withdrawal, so move quickly.
Notify Creditors, Insurers, and License Issuers
Delaware does not legally require notice to creditors, but sending it protects you. Give written notice to known creditors, vendors, and contractors that the LLC is winding up, and include a deadline for submitting final claims. That paper trail shows creditors had a chance to collect, which helps guard members against later personal-liability claims.
Cancel active insurance policies in writing. Many carriers require a specific number of days’ notice, and simply stopping payment can leave the LLC (and any personal guarantor) on the hook for continued premiums. Cancel state and local business licenses and permits too, since many auto-renew and can generate fees or tax assessments long after the LLC is gone.
Keep the Records
Cancellation is not permission to shred everything. The IRS recommends keeping tax records at least three years after filing the final return, longer in specific situations, and employment tax records at least four years after the tax was due or paid.12Internal Revenue Service. IRS Publication 583 – Starting a Business and Keeping Records13Internal Revenue Service. How Long Should I Keep Records Hold on to the formation documents, the operating agreement, member resolutions, and the stamped Certificate of Cancellation permanently. Those are what you’ll need if a claim surfaces years later.