Dissolving a Delaware LLC for Foreign Owners: Steps, Filing Obligations, and Final Wrap-Up

Dissolving a Delaware LLC for Foreign Owners: Steps, Filing Obligations, and Final Wrap-Up

Dissolving a Delaware LLC, particularly for foreign owners, involves several steps, from filing with the Delaware Division of Corporations to settling taxes and closing business accounts. Foreign owners often rely on professionals such as CPAs, registered agents, and attorneys to manage the process efficiently. This guide outlines the dissolution process, including final tax obligations and other critical steps to ensure your business is closed properly.



1. Filing the Certificate of Cancellation

The first formal step to dissolve your Delaware LLC is to file a Certificate of Cancellation with the Delaware Division of Corporations. This officially terminates the existence of your LLC at the state level. However, there are important prerequisites to address before proceeding.

2. Settling Delaware’s Annual Franchise Tax

Before dissolving your LLC, you must ensure that you have paid the annual franchise tax for the year of dissolution. Delaware LLCs are required to pay an annual franchise tax of $300, which is due on or before June 1 every year.

For instance, if you wish to dissolve your LLC in December 2024, you will still need to pay the 2024 franchise tax before you can proceed with dissolution, even if you had already paid the 2023 tax. Neglecting to pay this tax can prevent the LLC from being dissolved.

3. Ensuring Your Registered Agent Contract is Active

Delaware law requires all LLCs to have a registered agent to receive legal and official documents. Before dissolving your LLC, ensure your registered agent contract is active and up to date. If your registered agent fails to fulfill their duties due to non-payment or contract expiration, your LLC could face forfeiture, administrative suspension or dissolution.

Once your LLC is officially dissolved, you are no longer required to maintain or pay for registered agent services.

4. Closing Business Bank Accounts and Distributing Assets

Before finalizing the dissolution, it is essential to close your business bank account and distribute any remaining funds to the LLC members or owners. This distribution must be reported on your final IRS filings (Especially the proforma 1120 & 5472). Ensure all outstanding bills, contracts, or obligations are settled before distributing the remaining funds.

Closing the bank account before filing your final tax returns is crucial, as it allows for accurate reporting of any distributions or transactions made before the LLC’s termination.

5. Fulfilling IRS Filing Obligations

When dissolving a Delaware LLC, you must also file final information returns with the IRS, even if your LLC has no U.S. taxable income. These filings include:

  • Pro forma Form 1120: This is a placeholder form used for foreign-owned LLCs that are considered disregarded entities for U.S. tax purposes.
  • Form 5472: This form is used to report related-party transactions between the foreign owner and the LLC, such as capital contributions, loans, or distributions.

For example, if you dissolve your LLC in November 2024, the final Form 1120 and 5472 must be filed by March 15, 2025 (15th day of the 4th month after the end of the entity’s tax year). Failure to file these forms on time can result in significant penalties.

6. Closing Your EIN with the IRS

Once your LLC is dissolved, you should notify the IRS that your Employer Identification Number (EIN) is no longer in use. While your EIN cannot be canceled permanently, sending a formal letter to the IRS to close the account associated with the EIN indicates that your business is closed, and no future tax filings are expected.

However, your EIN will remain assigned to you in case you decide to reopen the business in the future.



7. Final Steps in Winding Down Your LLC

After filing the necessary state and IRS paperwork, there are additional steps to properly wind down your business:

  • Notify Creditors and Settle Debts: If you haven’t already, notify creditors of your LLC’s dissolution and settle any outstanding debts. Creditors typically have 120 days to make claims after being notified.
  • Pay Final Taxes: Complete any final information and tax filings with the IRS or state tax authorities to ensure your LLC is fully compliant.
  • Liquidate Remaining Assets: Sell off any remaining physical or financial assets to pay off any remaining bills or distribute funds to members or owners.
  • Cancel Business Licenses and Permits: Ensure all business licenses, permits, and DBAs are canceled with the issuing agency. This includes resale certificates or any fictitious business names associated with the LLC.
  • Review and Cancel Supplemental Services: Cancel any ancillary business services, such as registered agent services, phone services, mail forwarding, or web hosting, to avoid future charges after dissolution.

8. Selling Your LLC to Another Entity

If you prefer to sell your LLC rather than dissolve it, the process is relatively straightforward. The LLC can be sold to another interested party or entity through a simple sale agreement. The LLC’s assets or your membership interest can be transferred to the new person or entity at an agreed-upon price.

9. Final Confirmation Letter

Upon completing the dissolution process, it’s important to formally wrap up your business. You should receive a dissolution confirmation from the professionals who handled the filing on your behalf. This letter confirms that the state has approved your LLC’s dissolution, and it should be stored with your business records.

In addition, the following tasks should be completed:

  • Notify Creditors: If any creditors have yet to be informed, notify them about the LLC’s closure.
  • Close EIN: While your EIN remains attached to your business, formally closing the IRS account associated with it ensures no future tax filings are expected.
  • Liquidate Assets: Sell off any remaining physical or financial assets and distribute funds accordingly.
  • Cancel Services: Review and cancel any additional services like registered agents, phone lines, mail forwarding, and web hosting.

10. BOIR Compliance Under the Corporate Transparency Act

Foreign-owned LLCs must also comply with the Beneficial Ownership Information Reporting (BOIR) requirement under the Corporate Transparency Act (CTA). This reporting is designed to prevent money laundering and ensure transparency about who owns U.S. companies.

Deadlines for Filing:

  • For LLCs formed before January 1, 2024, the deadline to file the beneficial ownership information report is January 1, 2025.
  • For LLCs formed on or after January 1, 2024, the report must be filed within 90 days of formation.

11. Conclusion and Next Steps

Dissolving a Delaware LLC involves more than just filing a certificate of cancellation. To properly wind down the business, ensure you pay all taxes, file the necessary IRS forms, close accounts, notify creditors, and comply with BOIR requirements. By following these steps, foreign owners can dissolve their Delaware LLCs smoothly and avoid penalties.

Need assistance with dissolving your Delaware LLC or complying with IRS and BOIR regulations? Contact O&G Tax and Accounting Services for professional guidance every step of the way. Schedule a consultation here.

Comply with BOIR Regulations

At O&G Tax and Accounting, we specialize in helping foreign-owned LLCs meet Beneficial Ownership Information Reporting (BOIR) requirements under the Corporate Transparency Act (CTA). Contact us today for help filing your BOIR report and ensuring full compliance.