It has been a challenging year, particularly for many small businesses. According to the US Chamber of Commerce, "Only four in 10 (40%) of all small business owners believe their business can continue to operate indefinitely without having to shut down permanently."
If it's time to say goodbye to your business, we can help you close up shop so that you're not accruing taxes in to 2021.
How Delaware Corporate and LLC Taxes Work
Delaware assesses taxes on all active entities annually on January 1. If your business was open for even one day of 2021, you will owe the full tax amount.
If you wish to close your business and do not want to pay taxes for 2021, you'll need to make sure your entity is officially dissolved or cancelled by December 31, 2020.
LLC vs. Corporation
Legally closing your LLC is called a cancellation. Legally closing your corporation is called a dissolution. They both mean that your entity no longer exists.
Taxes and fees are due for Delaware corporations in March and for LLCs in June. Whether you have an LLC or corporation, if your business entity was open on January 1, 2021, you will owe the full tax amount.
Why Not Just Stop Paying Taxes?
It may seem easier to allow the state to administratively dissolve your corporate charter or cancel your LLC after a period of non-compliance with tax payments and filings. This strategy is risky, as it may result in issues such as mounting penalties, fees, and possible personal liability for judgments against the business.
The right way to formally conclude your business-related obligations is to file a dissolution of your corporation or a cancellation of your LLC with the state of Delaware. By doing so, you will end the existence of your entity.
If your business is qualified to do business in other states, you should file a withdrawal in those states as well.
DIY Dissolution or Cancellation
Should you choose to file the dissolution or cancellation yourself, you can find the dissolution and cancellation forms on the state of Delaware website here. Select and complete the form which applies to your entity.
You will also need to fill out and include the required filing memo found here. You may then fax, upload or mail these forms along with the appropriate fees to the Delaware Division of Corporations (these may be found on the filing memo).
Keep in mind, the processing time for your documents will be longer because you do not have direct access to the Delaware Corporate Information System. Only Delaware registered agents do. The USPS is experiencing delays and therefore we would not recommend using that method of submission if you want to ensure processing before year end.
Once the state has finalized your cancellation or dissolution, you will receive a filed copy of your documents in the mail.
Filing Your Cancelation with a Registered Agent
The advantage of using a Delaware registered agent (like The Incorporators), is that we have direct access to the Delaware Corporate Information System and can therefore cut down on the processing time of your dissolution or cancellation. This ensures that your documents are processed by year end and may save you the cost of taxes for 2021 if your paperwork does not reach the state of Delaware in time to be processed in 2020.
If you wish to utilize our services, we handle all paperwork and you will receive your filed copy of your documents via email in days. You can begin the process by submitting our form here and we will respond promptly with the next steps.
Deadline for Filing
The Incorporators will stop taking cancellation and dissolution orders on December 28th, to ensure that we can process them fully by year end.
If you have any questions about closing your Delaware entity, feel free to give us a call at 800-223-3928 or email us at firstname.lastname@example.org.