Are you ready to stop doing business with your Delaware corporation, but you’re not sure how the official dissolution process works?
The state of Delaware requires corporations to file documentation of a dissolution, which can differ depending on a couple of key factors. What are these factors, and what does the dissolution process include? In this guide to dissolving a Delaware corporation, we’ll break down all the relevant details.
If at any point you need help, you can use a service like Incfile or Northwest Registered Agent to handle the process for you.
Guru Tip: Most company formation services are also able to dissolve your entity for a small fee. They’ll take care of the paperwork so you can move on. Two popular options are LegalZoom and Incfile.
What Does It Mean to Dissolve a Corporation?
In any state, there is a series of steps that needs to be followed in order to properly dissolve a corporation. While this process does vary some from state to state, for the most part it’s necessary to follow this basic plan (unless your corporation has not yet issued shares or started doing business, which we’ll get to shortly):
- Hold a board of directors meeting and formally move to dissolve your corporation. The resolution to dissolve must be agreed upon by a majority of the corporation’s directors. Depending on your corporation’s structure, you may then need to take the vote to your shareholders. Either way, it’s important to take detailed records of this process for your corporate record.
- File the Certificate of Dissolution (including the Filing Cover Memo) with the Delaware Secretary of State.
- Fulfill all tax obligations with the state of Delaware, as well as with the IRS.
- Cancel any relevant licenses and permits, along with closing your business bank account.
- Notify customers, vendors, and creditors of your dissolution.
Most of these steps are fairly self-explanatory, but where many corporation owners run into some confusion is when it comes to the Certificate of Dissolution. With that in mind, let’s dive into the details of this step.
How to Dissolve a Delaware Corporation by the Board of Directors
Most corporations must be dissolved by the board of directors, and we discussed the necessity of holding a meeting to reach this resolution in the previous section.
In order to dissolve a Delaware corporation, you must file the Certificate of Dissolution with the Secretary of State. You must also include the Filing Cover Memo, which provides basic contact information for service of process. The Certificate of Dissolution requires the following information:
- Corporation name
- Date of formation
- Date of dissolution authorization
- Names, titles, and address of all corporation directors and/or officers
- Signature of an authorized officer
Along with the paperwork, you will need to write a check for $204 made payable to the “Delaware Secretary of State.” You can mail the form and the check to this address:
Delaware Division of Corporations
401 Federal Street – Suite 4
Dover, DE 19901
You will also need to contact the Department of Revenue to learn about any taxes that your corporation owes. If your corporation does owe taxes, payment will need to be included with your Certificate of Dissolution. The entire process generally takes 2-3 weeks.
How to Dissolve a Delaware Corporation by the Incorporators
Sometimes, entrepreneurs need to dissolve their corporation before shares are issued or any business is transacted. In this situation, the incorporator will need to take responsibility for dissolving the corporation.
If your corporation has not begun conducting business in Delaware, then you will need to file an alternate version of the Certificate of Dissolution. You can find this form here. However, if you have begun conducting business, but have not yet distributed shares, then you will need to file this version of the form. These forms require slightly different information.
Certificate of Dissolution Before Beginning of Business:
- Corporation name
- Date of formation
- Indicate the amount of capital paid
- Signature of the majority of directors or officers
Certificate of Dissolution Before Issuance of Shares:
- Corporation name
- Date of formation
- Signature of the majority of directors or officers
In either case, the process is the same as it is for the standard Certificate of Dissolution. You will need to include a check for $204 made payable to the “Delaware Secretary of State.” You will also need to check for any tax liabilities with the Department of Revenue and include payment with this form if necessary. You can send the form and all checks to this address:
Delaware Division of Corporations
401 Federal Street – Suite 4
Dover, DE 19901
Finally, both of these forms have the same 2-3 week turnaround.
What Else Do I Need to Know About Dissolving a Corporation in Delaware?
As soon as your Delaware corporation is dissolved, another entity can claim your business name. This is one of many reasons that dissolution should only be done if you have no intention of continuing your business in Delaware.
In some cases, the state can also initiate administrative dissolution. This can happen if you fail to pay your taxes or fail to be in compliance with state regulations. If your corporation is administratively dissolved, you can still reinstate it by filing the Certificate of Renewal and Revival of Charter for a Voided Corporation with the Department of State.
In addition to the fees associated with renewing your corporation, you will also need to check with the Department of Revenue to make sure that your corporation does not owe any taxes before it can be reinstated.
Conclusion
While the forms are different for corporations that have either not conducted business or not distributed shares, the process is virtually the same for any corporate entity.
Either way, it’s crucial that you complete each step discussed in this guide accurately, because you certainly don’t want to run into any issues with the dissolution process.
We hope this guide helped you answer any questions you might have had about dissolving a Delaware corporation!