Why not just let it lapse?
If you stop paying, Delaware eventually voids a corporation’s charter or cancels an LLC — but unpaid franchise tax, penalties and interest keep accruing until then, and the company’s US federal filing obligations (including Form 5472 penalties) don’t disappear. In India, your overseas investment remains open with your AD bank, the Annual Performance Report stays due every year, and a delay in reporting can block you or your company from making further overseas investments until it is regularised.
Before you dissolve
- Approvals: for a corporation, the board adopts a resolution to dissolve and stockholders approve it, as Delaware law and your bylaws require. For an LLC, follow the operating agreement.
- Wind up the business: end contracts, collect receivables, settle creditors and employees, and deal with any IP or remaining assets.
- Distribute what’s left to shareholders or members — this is the money that has to come back to India.
Delaware filings
- Clear the state account first. Delaware won’t accept a certificate of dissolution until all franchise taxes due through the date of dissolution are paid and all annual franchise tax reports are filed. For LLCs, pay the annual LLC tax.
- Corporations file a Certificate of Dissolution with the Division of Corporations.
- LLCs file a Certificate of Cancellation after winding up.
- Delaware revised many filing fees from 1 August 2026, so confirm the current fee when you file.
IRS filings
- Form 966 — corporations generally file this within 30 days of adopting the resolution or plan to dissolve.
- Final Form 1120 — marked as the final return, for the year the corporation closes (with Form 5472 if it is 25% or more foreign-owned).
- Foreign-owned single-member LLCs — file the final pro forma 1120 with Form 5472 reporting the closing distributions.
- Payroll and 1099 filings — close out any payroll accounts and file final information returns for US contractors.
Other states, bank account and registered agent
- If the company registered to do business in other states, file withdrawals there and close state tax and sales-tax accounts.
- Close the US bank account only after final payments and the distribution to shareholders.
- Keep your registered agent in place until dissolution is effective — the company must maintain one until then.
The India side: exiting the overseas investment
- Bring the money home: repatriate the distribution or sale proceeds to India within the timeframe set by the Overseas Investment Rules (generally within 90 days of their becoming due).
- Report the exit: report the disinvestment or winding up to your AD bank within 30 days of receiving the proceeds, in the RBI-prescribed format, so the investment’s UIN can be closed.
- File any pending APRs for years up to closure — gaps must be regularised first.
- Tax in India: the distribution is taxed in India (as capital gains or otherwise, depending on how it is characterised), with credit for any US tax; disclose the holding for the year in Schedule FA.
- Write-offs: where the investment is lost, specific conditions apply to writing it off — take advice before the final remittance.
Background on the India-side rules: FEMA, ODI & tax rules for US companies and US subsidiary of an Indian company.
Closing checklist
| Step | Where |
|---|---|
| Board / member approval to dissolve | Company |
| Form 966 (corporations, within 30 days of the resolution) | IRS |
| Pay all franchise tax and file annual reports through dissolution | Delaware |
| Certificate of Dissolution / Cancellation | Delaware |
| State withdrawals; close payroll and sales-tax accounts | Other US states |
| Final Form 1120 (+ Form 5472), final 1099s | IRS |
| Repatriate proceeds; report the disinvestment within 30 days of receipt | AD bank / RBI |
| Pending APRs; Schedule FA and tax on the distribution | AD bank / Income-tax return |
Frequently asked questions
What happens if I just stop paying for my Delaware company?
Delaware eventually voids or cancels the entity, but franchise tax, penalties and interest accrue until then, federal filing obligations continue, and the overseas investment remains open with your Indian bank — with APRs still due.
Can I file a Certificate of Dissolution if franchise tax is unpaid?
No. Delaware requires all taxes due through the effective date of dissolution to be paid and all annual franchise tax reports to be filed before it accepts a certificate of dissolution.
What IRS forms are needed to close a Delaware corporation?
Generally Form 966 within 30 days of adopting the resolution or plan to dissolve, and a final Form 1120 (with Form 5472 if the corporation is 25% or more foreign-owned).
What do I report in India when closing my US company?
Repatriate the proceeds within the permitted time and report the disinvestment or winding up to your AD bank within 30 days of receiving them, after regularising any pending Annual Performance Reports.
Please note: this guide is general information based on the rules as they stood on the review date above. Regulations and RBI/CBDT procedures change often — please get advice on your specific facts before acting.