Registering a business is a bold step, but sometimes you may also wish to shut down your business for several reasons. Whatever that reason is, there is a procedure to be followed for shutting down a business. This is most likely not as exciting as starting the business but is just as important.
Dissolving your business the right way is important because it serves as a notice to relevant authorities, creditors and the state that you are no longer in business. This also helps to ensure that you do not incur any liabilities or debts for a nonfunctional business.
How to Dissolve an LLC
1. Vote to dissolve the LLC
When you finally decide to dissolve your LLC, the first step is to take a unanimous or majority vote on it. The procedure to be followed for the voting will depend on the terms of your LLC’s Operating Agreement. The terms may specify how to cancel the LLC with a certain percentage of members in agreement to cancel. However, where cancellation is not provided for, you may follow the procedure provided in the Delaware state rules.
Delaware allows the LLC members who collectively own more than two-thirds of the company to agree by vote to cancel the LLC. Once members have voted and the resolution passed to dissolve the LLC, it is important to record this in writing and store it in your official records.
2. Terminate your business affairs.
The next step after would be to terminate all your business affairs. This includes settling outstanding debts, pending suits or outstanding taxes, allocating assets, and closing your bank account. If your LLC is registered in other states outside Delaware, you will also need to terminate that as well.
3. Settle taxes and other obligations.
A major step to take before dissolving your LLC is to ensure that all liabilities towards tax and any relevant licensing authorities are settled. This will include paying state franchise taxes, federal taxes and any late fees and interest if applicable.
4. File the Certificate of Cancellation
Just as there is some paperwork required for forming your LLC, there is also paperwork involved in dissolving the LLC. You must obtain what is referred to as a Certificate of Cancellation from the State of Delaware’s website and then fill out and submit it. One member (owner) of the LLC must sign the Certificate before it is submitted.
This is a sample of the Certificate of Cancellation required to be filled and filed by the State of Delaware. Delaware also requires that you attach evidence of payment of franchise taxes while applying for the dissolution. The official fee for filing for the dissolution is $200.
The timeline for the whole process should take between two to three weeks until the Certificate of Cancellation is ready.
Other issues to be dealt with include distributing any remaining assets, letting employees go and settling payroll taxes, closing your business bank account and cancelling your EIN if you have one.
