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What's the simplest way to kill a Delaware C Corp?

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Re: What's the simplest way to kill a Delaware C Corp?

#11

Post by encoderer »

ianhawes wrote: post #5

A general PSA for those finding this later on: Unless you expect to close a round of VC funding within 3-5 months (i.e. you already have investors lined up) you should generally save yourself the hassle and form a Delaware LLC instead. The process of converting a DE LLC to a DE C Corp is far easier than the paperwork involved in properly running a DE C Corp when you're bootstrapping. Remember that as a solo founder w…

The counterpoint to this is QSBS. Also, the tax situation is complicated. The tax delta between the two is not that wide as long you run break even, though it does still favor the llc, until exit.

Re: What's the simplest way to kill a Delaware C Corp?

#12

Post by giantg2 »

gamblor956 wrote: post #10
ianhawes wrote: post #5

A general PSA for those finding this later on: Unless you expect to close a round of VC funding within 3-5 months (i.e. you already have investors lined up) you should generally save yourself the hassle and form a Delaware LLC instead. The process of converting a DE LLC to a DE C Corp is far easier than the paperwork involved in properly running a DE C Corp when you're bootstrapping. Remember that as a solo founder w…

As a tax lawyer, I am compelled to point out that Delaware is probably the worst place to organize an LLC. Delaware has a great volume of corporate tax law but most of it does not apply to the LLC form, which negates the only reason to go with Delaware versus another state. If you are going the LLC route, either organize it in Wyoming or else in the state where you will actually be doing business. Wyoming LLCs have t…

"Wyoming LLCs have the greatest flexibility in terms of organizational requirements and capital structure (and the lowest tax/compliance costs for keeping it alive)."

PA has been extremely easy and is actually cheaper (vs a WY LLC in PA given youd still need to pay PA income taxes) since the report is only due every 10 years with a renewal of $70 vs $50 every year. So it's definitely worth looking at your home/operating state prior to defaulting to WY.

Re: What's the simplest way to kill a Delaware C Corp?

#13

Post by MichaelZuo »

ilaksh wrote: post #9

I think the whole industry around incorporation is a racket at this point. It's literally a database. It should not cost hundreds of dollars to put a record in a database, or keep it in there. Or thousands of dollars to tell you how to take it out. I had stupidly incorporated something related to some fantasy idea I never ended up with the funds to pursue. A year later with zero actual activity, I am informed that I…

> I think the whole industry around incorporation is a racket at this point. It's literally a database. It should not cost hundreds of dollars to put a record in a database, or keep it in there. Or thousands of dollars to tell you how to take it out.

It costs them 0.01 dollars to put a record in a database, and $499.99 to assume legal liability over the record.

Re: What's the simplest way to kill a Delaware C Corp?

#14

Post by aficiomaquinas »

In order to surrender the foreign qualification in the state of California you'll have to file your last California return, be sure to mark the return as final in the actual form and make sure it's correct. Hire a CPA. California franchise tax is paid in advance, so don't pay the 800 dollars for next year, otherwise they'll make you beg them to give it back, which they'll eventually will, after a couple of years, by the time the company will not exist and that payment will be unrecoverable. Once the final Cal return is filed, you'll have to file form SURC.

You'll have to file your final federal tax return, too. Although you might be able to do it yourself with Turbotax, I'd hire a CPA.

You'll have to legally dissolve the company with the articles of dissolution and make sure all the previous board meetings and cap table is sound. Then file the dissolution with the Delaware Secretary of State. If you don't hire a lawyer to double-check the corporation for you, you'll be exposing yourself to liability down the road, which will could be costlier than the lawyer's fees. Corporations must liquidate their assets, and that requires filing forms with the IRS, too. After that, you'll have to close the bank accounts, vendor accounts, credit cards, etc.

Re: What's the simplest way to kill a Delaware C Corp?

#15

Post by brudgers »

andrewmcwatters wrote: post #6

This isn’t particularly helpful for the OP, so sorry tlhunter, but for anyone else reading, please don’t bother with Stripe Atlas or a Delaware company. Just form your private business with your local corporation commission. You need to understand basic corporate operations to do business, and jumping immediately into all of this extraneous work is completely unnecessary for small private businesses.

A sole proprietorship is the simplest thing that might work.

I know it is not a popular suggestion, but it can be a good choice when there’s not a whole lot of uninsurable liability, few assets, and limited working capital.

Since anyone can sue anyone for anything anyway.

YMMV…but YAGNI also often applies.

Re: What's the simplest way to kill a Delaware C Corp?

#16

Post by mattbrewsbytes »

brudgers wrote: post #15
andrewmcwatters wrote: post #6

This isn’t particularly helpful for the OP, so sorry tlhunter, but for anyone else reading, please don’t bother with Stripe Atlas or a Delaware company. Just form your private business with your local corporation commission. You need to understand basic corporate operations to do business, and jumping immediately into all of this extraneous work is completely unnecessary for small private businesses.

A sole proprietorship is the simplest thing that might work. I know it is not a popular suggestion, but it can be a good choice when there’s not a whole lot of uninsurable liability, few assets, and limited working capital. Since anyone can sue anyone for anything anyway. YMMV…but YAGNI also often applies.

When investigating such things for a solo software business I read that you can even just claim additional income on your taxes and call it a hobby until you get sufficiently big enough and then pay an attorney and accountant to figure out the best path forward. There is some risk about liability but for small revenue software its unlikely someone wants something beyond a 100% refund.

Re: What's the simplest way to kill a Delaware C Corp?

#17

Post by itake »

gamblor956 wrote: post #10
ianhawes wrote: post #5

A general PSA for those finding this later on: Unless you expect to close a round of VC funding within 3-5 months (i.e. you already have investors lined up) you should generally save yourself the hassle and form a Delaware LLC instead. The process of converting a DE LLC to a DE C Corp is far easier than the paperwork involved in properly running a DE C Corp when you're bootstrapping. Remember that as a solo founder w…

As a tax lawyer, I am compelled to point out that Delaware is probably the worst place to organize an LLC. Delaware has a great volume of corporate tax law but most of it does not apply to the LLC form, which negates the only reason to go with Delaware versus another state. If you are going the LLC route, either organize it in Wyoming or else in the state where you will actually be doing business. Wyoming LLCs have t…

+1. I always just organize in the state I reside, because managing multiple LLC registrations (LLC state and the franchise state) is too much work for an almost non-existent business.

Re: What's the simplest way to kill a Delaware C Corp?

#18

Post by piperswe »

ilaksh wrote: post #9

I think the whole industry around incorporation is a racket at this point. It's literally a database. It should not cost hundreds of dollars to put a record in a database, or keep it in there. Or thousands of dollars to tell you how to take it out. I had stupidly incorporated something related to some fantasy idea I never ended up with the funds to pursue. A year later with zero actual activity, I am informed that I…

There's also prior art for simplified corporation registration - the UK's Companies House very much acts as just "creating an entry in a database for a nominal fee," with incorporation on the website costing only 12GBP, and a dissolution ("strike this company off the database, please") happening entirely online and costing 8GBP (a "voluntary strike off")

https://www.gov.uk/government/publications/companies-house-f...

Re: What's the simplest way to kill a Delaware C Corp?

#19

Post by zugi »

ilaksh wrote: post #9

I think the whole industry around incorporation is a racket at this point. It's literally a database. It should not cost hundreds of dollars to put a record in a database, or keep it in there. Or thousands of dollars to tell you how to take it out. I had stupidly incorporated something related to some fantasy idea I never ended up with the funds to pursue. A year later with zero actual activity, I am informed that I…

Why start a corporation in the first place versus an LLC or even a sole proprietorship? The latter costs close to nothing to start, and it doesn't ever need to be dissolved - just stop filing Schedule C once you stop having income and expenses.

If you choose the more complex route of a Delaware corporation, it's going to cost you more. OP would have at least made some money under an LLC or a sole proprietorship, but going the Delaware corporation route likely turned it into a net loss.

Re: What's the simplest way to kill a Delaware C Corp?

#20

Post by brudgers »

mattbrewsbytes wrote: post #16
brudgers wrote: post #15

Earlier quoted context omitted.

A sole proprietorship is the simplest thing that might work. I know it is not a popular suggestion, but it can be a good choice when there’s not a whole lot of uninsurable liability, few assets, and limited working capital. Since anyone can sue anyone for anything anyway. YMMV…but YAGNI also often applies.

When investigating such things for a solo software business I read that you can even just claim additional income on your taxes and call it a hobby until you get sufficiently big enough and then pay an attorney and accountant to figure out the best path forward. There is some risk about liability but for small revenue software its unlikely someone wants something beyond a 100% refund.

I am neither an accountant nor attorney.

The way I do it is using Schedule C and the relates forms.

Banking is one thing a sole proprietorship simplifies because all you need is a separate personal account to use for the business and banks are happy to set one up.

If the business doesn’t generate much income you might even get away with not paying out taxes quarterly and use additional withholding instead.

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