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A certificate of dissolution is a formal document filed with the company’s state of incorporation that indicates that the company wishes to end its legal existence.
Since the majority of U.S. startups are incorporated in Delaware, this article discusses the certificate of dissolution specifically within the context of Delaware corporations.
Overview
In order to receive a certificate of dissolution, companies must file a form with the secretary of state. Delaware has several different versions of forms that apply depending on a company’s incorporation type (e.g., corporation or LLC) and key facts (e.g., did or did not issue shares).
For Delaware corporations, the different form versions are further delineated into two types: the standard form and the short form (the latter is suffixed by “– Short Form”).
Most early-stage, venture-backed startups are corporations, have started business, and have issued shares. As a result, typically the applicable version of the Delaware forms is the certificate of dissolution filed in accordance with Section 275 of the General Corporation Law of the State of Delaware (either the standard or short form).
A company must pay any taxes due at the Delaware state level, along with required yearly franchise taxes for each year of operation, and receive authorization to dissolve prior to filing the certificate of dissolution.
The forms for a certificate of dissolution are available here on the Delaware website.
Certificate of dissolution - Section 275
The form for the certificate of dissolution to be filed in accordance with Section 275 (and Section 381(a)(5)(b)) of the General Corporation Law of the State of Delaware is considered the standard Delaware dissolution form for corporations.
The form has an associated filing fee of $224.00 (with an additional $9.00 per additional page).
Certificate of dissolution - Section 275 (short form)
The short form for the certificate of dissolution to be filed in accordance with Section 275 (and Section 381(a)(5)(b)) of the General Corporation Law of the State of Delaware is available for corporations able to attest to the following:
The corporation has no assets and has ceased transacting business.
The corporation, for each year since its incorporation in Delaware, has been required to pay only the minimum franchise tax.
The corporation has paid all franchise taxes and fees due to Delaware through the end of the year in which the certificate of dissolution is filed.
The form has an associated filing fee of $10.00.
Investor communication
Investors may request a copy of the certificate of dissolution for their records to help enable them to write off their investment.
As a founder, you can proactively anticipate investors’ request for a copy of the certificate of dissolution by letting them know that you will share a copy once it is filed.