How do I shut down a Delaware corporation properly?
DissolutionComplianceDelaware
Dissolving a Delaware corporation properly runs in this order: the board and the stockholders approve it, the company brings its franchise taxes and annual reports current, it files a certificate of dissolution, it tells the IRS on Form 966 within 30 days of the resolution, it files final federal and state returns, it pays creditors and distributes what is left, and it closes its EIN account and any foreign qualifications.
Approvals
Under section 275 of Delaware's corporation law the board resolves that dissolution is advisable and the holders of a majority of the outstanding stock entitled to vote approve it. If every stockholder signs, no board action is needed. A corporation that never issued shares or began business can dissolve on a certificate signed by a majority of its incorporators or directors.
The Delaware filing
The certificate is filed with franchise taxes paid and the annual report filed through the dissolution date. The state's fee schedule lists $224 for a standard certificate and $50 for the short form, open to a corporation with no assets, no ongoing business, and only ever the minimum franchise tax. After filing, the corporation continues for three years to wind up, and it must pay or provide for its known claims before distributing anything to stockholders.
The IRS
Form 966 is due within 30 days after the resolution is adopted. The final Form 1120, with the final return box checked, is due by the 15th day of the fourth month after the dissolution date. Final employment returns follow, then a letter closing the EIN account, which the IRS will not act on until every return is filed and every balance paid.
Why not just stop paying
Delaware voids the charter of a corporation that goes a year without paying its franchise tax or filing its annual report, which is not a dissolution. Penalty and interest keep accruing, nobody wound the company up or told its creditors, the IRS still expects returns, and the founders are left with a dead company whose obligations can still be asserted.
Arabella has no dissolution package today. Ask Arabella can lay out the order for your company.
Related questions
Written by the lawyers who built Arabella. This is legal information, not legal advice for your situation, and reading it does not make us your lawyers. For a real dispute or a high-stakes decision, talk to a licensed attorney. More questions.