How Do I Dissolve a Corporation in Delaware?

Dissolving a corporation is a process.

To dissolve a corporation in the state of Delaware the corporation's Board of Directors must make a resolution which states the intent of the corporation to dissolve. This resolution must then gain approval by a majority or unanimous vote from the shareholders. After the shareholders approve the decision, a certificate of dissolution must be filed with the secretary of state. Each step has specific details, and understanding the process in depth will help ensure that you perform the dissolution properly.

Things You'll Need

• IRS form 966
• Delaware certificate of dissolution form
• Money for fees

Instructions

1. 

   Carefully decide if this is what you want.

   Decide to dissolve your corporation. Do not make this decision lightly; consider other options first, such as a change in business strategy or taking out a loan. To officially decide to dissolve the corporation, its Board of Directors must make a formal resolution which articulates the decision.

2. 

   Obtain a majority shareholder vote.

   Obtain a majority shareholder vote. In order to file for corporate dissolution, a majority of the shareholders must agree to do so. When corporations are formed, they will sometimes choose to create an operating agreement that spells out shareholder voting percentages required for dissolution. If such a clause exists within the operating agreement, then the vote must match that minimum percentage to validate the dissolution. If no specific requirements exist in the operating agreement, then the State Corporation Act applies. In Delaware this means a traditional majority according to Section 275 of Delaware's General Corporation Law.

3. 

   Create a plan.

   Create a plan of dissolution. Board members must come up with ways of dealing with remaining assets, unpaid debts, and company money. Before dissolution can become official, all government taxes must be paid whereas creditors may be willing to work out payment options. It is therefore advisable to pay government taxes first. This plan should also specifically address allocation of remaining funds to each creditor.

4. 

   Complete and send in IRS form 966.

   Complete and send in IRS Form 966. The IRS requires this form for all corporate dissolutions in any state. You will need to know the corporation name, address, date of incorporation, place of incorporation, the type of liquidation as well as other information. This form is available through the IRS.

5. 

   Obtain tax clearance.

   Obtain a tax clearance notification from the state taxing office. You must pay all taxes due before the dissolution of your corporation becomes legally official. According to Delaware corporation laws, no corporate dissolution can occur unless all taxes have been paid in full. This includes the taxes which would have accrued during the remainder of the month in which the dissolution became effective.

6. 

   Notify everyone involved.

   Notify all individuals and organizations involved with your business. This includes creditors, debtors, employees and customers. For creditors of the corporation, this step is required by law. Simply draft a notification message regarding the dissolution and mail it to your creditors.

7. 

   Pay everyone that you need to.

   Pay all shareholders when applicable. After all debts get settled, any remaining assets should get divided among the shareholders. You may find this easier said than done because different shareholders have different amounts invested and striking a common ground to get everyone in agreement may prove challenging.

8. 

   File the Delaware Certificate of Dissolution form.

   File the Delaware Certificate of Dissolution form. This form is accessible at http://www.corp.delaware.gov. Two versions of the form exist, one for stockholder corporations and one for non-stockholder corporations. To complete the form you will need the name of the corporation, a complete list of names and addresses of the corporation's directors and officers, the date of dissolution and an official signature by an authorized corporate officer. This form officially notifies the state of the corporation's dissolution and as of August 1, 2009 costs $204 plus an additional $9 per page, if the form consists of more than one page.

9. 

   Conclude your business affairs.

   Conclude business affairs. The General Corporation Law of the State of Delaware contains articles that allow three full years from the time the Certificate of Dissolution is filed until business activity must cease. This time allows for the publication of final notices to any persons involved with the corporation as well as the general winding down of any remaining business transactions.

10. 

    Notify the Delaware Division of Revenue.

    Notify the Delaware Division of Revenue of the corporate dissolution by checking the Out of Business box and indicating the final day of business affairs on your last corporate income tax return and your final withholding.
    Note: This step applies only to corporations that conducted business in the state of Delaware.

Tips & Warnings

• If, at any point in this process, you feel lost or confused, seek professional legal aid. Corporate lawyers specialize in these proceedings and have qualifications enabling them to solve any issue pertaining to corporate dissolution.

• This procedure was established based on research of corporate dissolution and of Delaware corporate law and is therefore not intended to serve in lieu of qualified legal advice or counsel.

References

• Delaware General Corporate Law: Chapter 1, Subchapter X
• Delaware Department of Finance: Division of Revenue
• Delaware Division of Corporations: Certificate of Corporate Dissolution Form

Resources

• Delaware Division of Corporations