Shutting down a company is not as simple as flipping the lights off and filing a single form. Even a small, straightforward wind‑down requires legal filings, tax compliance, payroll wrap‑up, and withdrawing from the states where you registered to do business. Each of those steps carries real, near‑term costs. If your remaining cash is thin, it is both normal and appropriate to ask your investors to help cover the final expenses so you can close cleanly.
This post gives you a practical framework for making that request. You’ll see why the ask is reasonable, what to prepare, how to phrase it, and what to do if some investors decline. We’ll also point to real rules and examples - like IRS checklists, Delaware dissolution fees, and multi‑state withdrawal quirks - so the guidance is grounded in the way shutdowns really work.
Most of the founders we speak with are U.S. software/tech teams at the end of their run. They’re stressed about legal complexity, money, relationships, and reputation. If that’s you, you’re not alone. Getting the closure right helps protect you and your backers in the long run.
Why It Is Reasonable to Ask
Investors have seen shutdowns before. It’s part of the startup lifecycle. In practice, they often prefer a clean, compliant wind‑down to avoid lingering risks. For example, if you’re a Delaware corporation (as many venture‑backed startups are), the law requires that you pay or make reasonable provision to pay known and likely claims before distributing any remaining assets. Directors who choose the simpler “default” (out‑of‑court) route take on more risk if they under‑reserve or miss steps, because that path lacks court oversight. A structured process lowers that risk.
There are also concrete costs that exist to protect investors and directors. One example is directors and officers (D&O) insurance “tail” coverage, which keeps coverage in force for claims that arise after you dissolve. A six‑year tail commonly costs 150%–250% of your annual D&O premium, and small private companies often pay $5,000–$10,000 per $1 million of D&O coverage per year. Budgeting for a tail is a direct way to protect board members and investor‑directors during and after shutdown.
Another reason investors value a proper close: it can speed the return of any leftover cash. In at least one 2020 Delaware case, the Court of Chancery allowed an interim distribution from dissolution reserves rather than forcing the company to hold all cash until every dispute finished. In plain English, a thoughtful plan can get some money back to shareholders sooner.
Finally, a clean closure reduces reputational and legal noise that can distract you from your next thing and complicate investors’ portfolios. The IRS, SBA, and state agencies expect specific steps - final tax returns, payroll reporting, state withdrawals, and record‑keeping. Doing it right avoids penalties, notices, and reopenings down the road.
What to Prepare Before You Reach Out
Investors respond best to a clear, transparent plan. Before you email or call, assemble three simple pieces:
A high‑level cost breakdown. Keep it short, but specific enough to build trust. Include legal entity dissolution and state fees, tax filings, payroll wrap‑up, any D&O tail premium, and registered agent or accounting costs. As benchmarks, Delaware’s current state filing fees are $224 for a standard corporate dissolution under Sections 274/275/276, $10 for a short‑form dissolution, and $220 to cancel a Delaware LLC. However, most customers choose the expedited processing option, which adds $100, since standard filings can take over two months to process at times. Even faster same-day service is available for an additional fee.
A summary of what’s been paid and what remains. Use a “Closing a Business” checklist to make sure your list matches what governments actually expect: final federal returns, Forms 940/941 for employment taxes if you had employees, 1099s for contractors, and closing your EIN account. Share what you’ve already filed or paid, and what is still outstanding.
Your current bank balance. State what’s in the account today and how much of the shutdown budget it covers. If there’s a shortfall, quantify it plainly and connect it to concrete tasks, not fuzzy “runway.”
If you did business in several states, add one paragraph on withdrawals. Some states are quick; others require tax‑clearance letters and can drag. For example, withdrawing from Louisiana often means waiting six to eight weeks for a Department of Labor clearance and, in some cases, up to two years for a Department of Revenue clearance. That timing affects your budget and your timeline, so it’s worth flagging.
If you’re using a shutdown service like SimpleClosure, include the scope and a firm quote so investors see exactly what they’re funding and what they’ll receive in return. If you’re not using a service, link to the state fee schedules and the IRS checklist so they can verify your numbers.
When your cap table has several investors, a pro‑rated ask often feels fairest. For instance, if the budget gap is $12,000 and your three investors own 40%, 35%, and 25%, you’d ask for $4,800, $4,200, and $3,000 respectively. You can also pro‑rate by check size if that better reflects expectations.
How to Phrase the Ask
Keep the tone calm and low‑pressure. Acknowledge where you are, share the plan, and invite support without implying obligation. Founders who do this well keep the email short, then attach or link to a one‑pager with the breakdown and timing.
You can adapt the following language:
“We’ve started the shutdown process and want to make sure it’s handled cleanly and compliantly. We’ve covered a portion of the costs ourselves, but there are still some remaining expenses related to tax filings, state withdrawals, and account closures. If you’re open to contributing, even partially, it would help us wrap things up responsibly.”
Two small but effective additions help. First, add a sentence that anchors the benefits to investors: “A clean dissolve protects the board and lets us return remaining cash as quickly as possible.” That’s true, as Delaware’s dissolution framework and IRS rules are designed to protect stakeholders who follow the steps. Second, add concrete timing: “We plan to file the dissolution certificate by [date], complete state withdrawals by [date], and deliver a final package of receipts and confirmations to all investors by [date].”
If one of your investors sits on the board, it’s worth referencing D&O tail coverage directly. You might add: “We’ve included a six‑year D&O runoff policy so the board remains protected after closure. The quote is $X, which reflects ~150–250% of our annual premium.”
If They Decline
Not every investor will say yes. That’s okay. Your job is to be respectful, transparent, and thorough. If some decline and you still have a gap, you have options.
You can reduce scope while staying compliant. For example, you can file the necessary final federal returns and dissolution paperwork first, then sequence state withdrawals in waves based on exposure. The IRS’s own guidance emphasizes “file final returns, take care of employees, and cancel your EIN,” which you can complete while you stage lower‑risk items to match your budget. You can also choose the default (out‑of‑court) dissolution process, which avoids court costs, though you should understand the added responsibility on directors to make “reasonable provision” for claims. A good shutdown partner or counsel will help you choose a path that fits your facts.
If liabilities are heavy and assets are limited, discuss whether an Assignment for the Benefit of Creditors (ABC) is better than a simple dissolution. ABCs are state‑law processes that liquidate assets and pay creditors; they are common in venture‑backed shutdowns with debt or complex vendor stacks. They’re typically faster and cheaper than Chapter 11, and secured creditors often support them when the budget is tight and the process is credible. That said, an ABC’s administrative budget has to be funded - from remaining collateral or other sources - so the funding conversation still happens, just in a different wrapper.
How SimpleClosure Can Support the Process
SimpleClosure helps founders organize and complete every step of the shutdown - from the dissolution certificate to multi‑state withdrawal and account closures. Our pricing is transparent, and we provide documentation you can share with investors: a one‑page scope, planned dates, and a final package of receipts and confirmations.
Because we manage the operational and compliance work end‑to‑end, remaining funds can often be returned faster and with fewer complications. For example, in a formal Delaware dissolution, courts have, in some cases, allowed interim distributions once reasonable reserves are set aside - something that’s much easier to do when your books are clean and your plan is documented. We build that plan with you and keep it current as tasks complete.
If you’re unsure how to size the budget, we can help you map real costs. Public sources show that even small tech shutdowns can add up once you include legal, tax, and multi‑state work. We’ll show you the pieces - Delaware filing fees, IRS steps and forms, D&O tail ranges - and tailor them to your situation. We can also prepare a pro‑rata investor summary so your ask is fair and easy to approve.
For context, industry guidance pegs private‑company D&O at roughly $5,000–$10,000 per $1M of coverage, and six‑year tails are often 150%–250% of the annual premium. State fees are modest but real (Delaware: $224 standard corporate dissolution, $194 short form; $220 LLC cancellation). If you spread those costs across several investors, the individual checks are manageable and buy a clean, documented close.
Real‑World Details You Can Borrow
When you outline costs to investors, anchor them to public facts:
Federal steps. The IRS publishes a “Closing a Business” page listing what to file: your final federal return, final employment tax deposits and Forms 940/941/943/944 if you had employees, 1099s for contractors, and a request to close your EIN account. The page also reminds you to keep records. Linking this shows you’re following the rules and not inventing busywork.
State fees and timing. Share the current Delaware fee schedule page showing dissolution fees and expedited options. If you’re registered in several states, add a sentence on withdrawals. A national compliance chart can explain that “foreign” entities (for example, a Delaware corporation registered in other states) need a certificate of withdrawal when they stop doing business in that state. In some states, you must obtain tax clearances first, which can extend the timeline - Louisiana is a notable case. Citing these helps investors see that a few thousand dollars of legal and filing work is not overkill; it is the cost of doing it right.
Board and director protections. Delaware’s statute requires a plan to pay or make reasonable provision for claims before distributing remaining assets. Commentary from Delaware practitioners notes that default (out‑of‑court) dissolution exposes directors to more risk if they get reserves wrong, while long‑form dissolution provides court‑blessed protection. Including a modest D&O runoff policy in your budget is a simple, defensible way to protect the board. These are the kinds of specifics that help an investor say “yes.”
Costs add up. Founders often underestimate the total. Beyond filings and insurance, there’s payroll wrap‑up, CPA time, and multi‑state work. Industry write‑ups aimed at startups warn that total shutdown bills can be significant once you add everything together, especially for companies with employees and multiple states. Bringing a grounded budget, with links, will feel professional - and will likely be the first time your investors have seen the plan presented so clearly.
Putting It All Together (An Example Flow)
You send a brief note to your investors on Monday. It opens with two sentences of context and the short, low‑pressure ask. It links to a one‑pager that shows: the current bank balance; a $17,500 shutdown budget; $10,000 already covered by the company; a $7,500 gap; and a pro‑rata ask based on ownership. It lists the tasks you’ll complete: file the Delaware dissolution certificate and pay the state fee; make final federal filings from the IRS checklist; purchase a six‑year D&O tail; close payroll and contractor reporting; and withdraw from three states, with Louisiana noted as slower due to tax clearances.
You add the planned dates for each item and a promise to send investors the final package (filings, receipts, confirmations) once complete. You end the email with: “If you’d prefer to fund specific line items - like the D&O tail or withdrawals - rather than a pro‑rata share, that works for us. We appreciate any support to close this out the right way.” The whole message reads like a plan, not a plea.
Closing Thoughts
Asking investors to help with closing costs is more common - and more reasonable - than most founders realize. It aligns everyone around a clean, fast, and compliant shutdown. It protects directors, reduces the chance of loose ends, and can even help return remaining cash sooner.
If you’re planning to wind down and unsure how to handle this part of the process, SimpleClosure can help you price the work, draft the one‑pager for your board and investors, and complete the operational and compliance steps end‑to‑end. You make one thoughtful ask, and we help you keep your promise.
This article is for general informational purposes only and does not constitute legal, tax, or financial advice. You should consult qualified professionals about your specific situation. The laws and fees here are subject to change and may not reflect the most current legal developments; check current rules for your entity and states (we’ve linked official sources above).