Hi! My name is XXXXX XXXXX X'll be the attorney assisting you.
The Delaware Division of Corporations supports a lot in the state.
As such, it's more like a business operation than an arm of a government branch. It's one big operation and as many of you feel, a little bit of a racket.
Most states just dissolve your company after a few years. Technically, in Delaware, you never really get dissolved, unless you go through some SERIOUS hoops and fees yourself. The state will say that you are continuing to rack up debt in the form of
Delaware franchise tax each and every year.
We hear horror stories each month of absurd amounts people owe in franchise tax because they have too many shares. We always say; it's the biggest completely legal scam in America!
We have clients that get a franchise tax bill for $150,000 a year plus! They just don't pay it, and then they land a deal a few years later and they need to show they are in good standing with the state of Delaware to get approved. They then find out they owe hundreds upon hundreds of thousands of dollars. Absolutely crazy!
So, the state has done something very smart. They really don't dissolve you! They just let a bill keep racking up and hope you pay it someday. They probably figure you're a lost cause anyway, so why go through the effort of dissolving your Delaware corporation. So, let's say you want to dissolve your corporation 5 years after not paying your franchise tax. You have to pay ALL the franchise tax, late fees, and interest, BEFORE the state will let you dissolve.
Now, to the best of our knowledge, we have never heard of the state actually going after some corporation for owed franchise tax. Funny thing about that is we have all these lobbyists drafting the laws to protect the shareholders, officers, and directors from the liability of the corporation. So in theory, the state shouldn't be able to go after you personally. It also seems like it would be awful for the perception of Delaware being a business friendly state and could ruin the reputation the state has spent so much time and money building. So we always just recommend forming a new company down the road if you need it.
So, botXXXXX XXXXXne - you can just let it go and not pay the franchise fee and form a new corporation if you need to do such later.
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