Dissolving a Delaware Corporation

Can you Dissolve a Delaware Corporation?

Corporations lean on Delaware’s favorable business laws when it is time to incorporate their business. However, what happens when you want to dissolve your Delaware corporation? When this time comes, there are a few steps that must be taken to formally dissolve your corporation. Although it is possible to dissolve your Delaware corporation, you must first prepare your corporation for dissolution.

To prepare your Delaware corporation for dissolution, three steps must be taken. First, you must hold a vote on whether the corporation should dissolve. The board of directors must first adopt a resolution to dissolve and submit it to the stockholders. After this is completed, a meeting of the stockholders has to be called where they would vote on dissolving the corporation.  Once voting is complete, if dissolution is authorized, it must be recorded on a Certificate of Dissolution. The Certificate of Dissolution must be filed with the state and must contain the date the vote is taken.

Before you can file the Certificate of Dissolution with the state, you first have to pay any outstanding taxes. If the outstanding taxes are not paid to the state, then you may not dissolve your corporation. Additionally, there might be franchise tax due. Before filing your Certificate of Dissolution, you must contact the Franchise Tax section of the Division of Corporation in Delaware and ask whether any franchise tax has to be paid. Once you have paid your outstanding taxes and any franchise tax, you may file your Certificate of Dissolution with the state.

What Steps do I have to take to Dissolve my Delaware Corporation?

The first step you have to take to dissolve your Delaware Corporation is to create the Certificate of Dissolution and file it with the state. The Certificate of Dissolution has to be sent with a cover letter, the contact information for a person who can answer any questions about the form and organization, and a filling fee. The Certificate of Dissolution must include the name of the corporation, the date of dissolution, a statement that the dissolution was authorized by the board of directors and stockholders, the name and addresses of the directors and officers of the corporation, and the filing date of the corporation’s certificate of incorporation. The letter, Certificate of Dissolution, and fee can all be sent to the Delaware Division of Corporation, which is located on 401 Federal Street, Suite 4, Dover, DE 19901.

There are two Certificate of Dissolution forms available in Delaware. The short Certificate of Dissolution form can be completed by your corporation if your corporation (1) has not assets, (2) has stopped doing business, (3) has only paid the minimum state franchise tax since it incorporated in Delaware, and (4) all taxes and fees have been paid through the end of the year. Corporations prefer the short form because of its much lower filing fee ($10). The short form does require more information than the standard Certificate of Dissolution as you have to include appropriate statements stating that the company has no assets, is no longer doing business, and has been paying the smallest amount of franchise taxes every year. Aside from the statement, documentation must be submitted showing that the taxes and fees have been paid through the year that you are filing for dissolution.

If your corporation does not meet the requirements for the short form, then it must file the standard Certificate of Dissolution. The standard Certificate of Dissolution will contain almost the same information as the short form, the difference in the standard form is that you will not have to include a statement stating that the company has not assets, is no longer doing business, and is paying the smallest amount of franchise taxes every year.  Additionally, the standard form requires a filing fee of $204 for a one-page document and $9 for any additional page.

What Occurs After Dissolution?

After you file your Certificate of Dissolution, your corporation may continue to exist for the following three years. However, your corporation will only exist for the purpose of “winding up.” Winding up occurs when the company is no longer doing business, but it still has to sell off stock, pay its creditors, prosecute and defend lawsuits, and distribute remaining assets to the shareholders. According to Delaware law, the first obligation when winding up is to pay liabilities and obligation, including paying creditors and taxes. Once all liabilities are paid, then the corporation may distribute the remaining assets, if there are any left.