Do I need to officially dissolve an unused LLC, or can I let it go void without any consequences?

Asked almost 2 years ago - Dover, DE

I started an LLC in August 2011 in Delaware - I haven't made any money on it or paid any franchise taxes in either Delaware or my home state of Virginia. I'm the sole owner - no partners involved. I now owe $750 in Delaware; I'm not sure about Virginia. I was hoping I could just disregard the old LLC and create a different one if I need to in the future without any tax hounds coming after me. Will I be ok if I just pretend I never started it?

Attorney answers (2)

  1. Brian M Gottesman

    Contributor Level 11

    Answered . Delaware requires the payment of the franchise tax each year regardless of whether the LLC earns income. In order to comply with the law, you would be required to pay back franchise taxes (together with late fees, interest, etc.). To avoid incurring future franchise taxes you would be legally required to formally dissolve the LLC. See generally 6 Del. C. s 1107.

    Failure to pay franchise tax for three years causes the LLC to automatically dissolve by operation of law. 6 Del. C. s 1108. This is what you mean by letting it "go void".

    Franchise tax due and owing is considered a debt of the company, and the state has various powers available to it in collecting its due. See 6 Del. C. 1107(g)-(j).

    The power of the state to collect past-due franchise tax from the personal assets of a member or manager, however, is strictly limited under 6 Del. C. 1107(n). It's possible depending on the circumstances that the State could attempt to collect past-due franchise taxes from a member, and the chances of this happening and/or being successful depend on a large number of factors that can't be addressed here. I have never heard of this happening in Delaware (it does routinely happen in some other states, like California).

    This answer is provided for informational purposes only and does not constitute legal advice. Unless and until we... more
  2. Evelyn Susan Ginossi

    Contributor Level 9


    Lawyer agrees

    Answered . At some point you will need to formally dissolve the entity, otherwise you will still be charged the annual state tax in Delaware. It's not clear whether you formally qualified the LLC to do business in Virginia, so I can't comment on your obligations in Virginia.

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Related Topics

Small business LLCs

An LLC (limited liability company) is a business entity that has elements of both a corporation and a partnership (or sole proprietorship).

Small business taxes

Small business taxes include state and federal income taxes and employment taxes, self-employment taxes, and excise taxes.

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