# How to shut down a startup: a founder's checklist

> How to shut down a startup: board and investor approval, Delaware dissolution, final payroll, SAFEs and notes, selling code and data, and wind-down costs.

Canonical: https://origindatapartners.com/guides/how-to-shut-down-a-startup
By: Origin Data Partners
Status: Published
Published: 2026-11-05
Updated: 2026-11-05
Sources checked: 2026-11-05

## Quick answer

To shut down a startup, have the board and stockholders approve a plan of dissolution (preferred investors often have their own vote), tell investors, employees and customers, pay final wages and give WARN notice if it applies, sell what has value and pay creditors. Anything left goes out in the order the cap table sets: convertible notes as debt first, then SAFEs and preferred stock, then common stock. A Delaware corporation pays all franchise taxes, files a certificate of dissolution ($224 plus taxes) and can use the section 280 notice process to set a claims deadline of at least 60 days. It also files IRS Form 966 within 30 days of the dissolution resolution. Before cancelling Slack, GitHub or Google Workspace, check what the records are worth: micro1, Turing's Project Lazarus, SimpleClosure's AssetHub and Sunset all take code or workspace data from closing companies.

## Key points

- Preferred investors usually hold a separate vote on dissolution, so bring the lead investors in before the board acts.
- Money goes out in a set order: creditors and convertible notes first, then SAFEs and preferred stock, then common stock.
- Export Slack, email, tickets and code before any subscription lapses. The records can be sold; a deleted workspace cannot.

## How to shut down a startup: the checklist

Before you cancel Slack, GitHub or Google Workspace, check what the startup's records are worth. AI developers now pay for the operational records of closing and closed companies, such as code, tickets, email and chat archives ([public deals](https://origindatapartners.com/guides/ai-data-licensing-deals)). A [free valuation](https://origindatapartners.com/check-fit) takes six questions about the business and no files.

Most venture-backed startups are Delaware corporations, so the steps below follow Delaware law; an LLC follows its own rules (see [how to dissolve an LLC](https://origindatapartners.com/guides/how-to-dissolve-an-llc)). [Carta](https://carta.com/learn/startups/exit-strategies/dissolution/) advises starting at least three months before the company expects to run out of cash. Several steps run in parallel.

| Step | What to do | Rule or deadline to know |
| --- | --- | --- |
| 1. Choose the route | The board compares a dissolution, an assignment for the benefit of creditors and bankruptcy, with counsel | Once the company is insolvent, creditors can bring derivative claims against directors |
| 2. Bring investors in | Talk to the lead investors before the board votes | Preferred stock terms often require investor approval to dissolve |
| 3. Approve the plan | Board resolution, then stockholder approval of a plan of dissolution | Delaware: a majority of the outstanding voting stock |
| 4. File Form 966 | Send the IRS the form with a certified copy of the resolution | Within 30 days of adopting the resolution |
| 5. Tell the team and customers | Notice, final pay, customer transitions and refunds | Federal WARN Act: 60 days' notice for covered closings |
| 6. Export the records | Full exports of chat, email, tickets, documents and code; keep admin access | Employment tax records must be kept at least 4 years |
| 7. Sell the assets | Code, IP, domains, customer contracts and data | Delaware: selling all or substantially all assets needs a majority stockholder vote |
| 8. Pay Delaware and file | Final franchise tax report and payment, then the certificate of dissolution | $224 filing fee plus taxes; all franchise taxes paid first |
| 9. Notify claimants | Optional section 280 notice, mailed to known claimants and published | Claims deadline no earlier than 60 days after the notice |
| 10. Pay creditors, then investors | Debts and notes first, then SAFEs and preferred stock, then common stock | On the notice route, no distribution until 150 days after the last rejection |
| 11. File final returns | Form 1120 marked final, final payroll returns, state returns | IRS closing checklist |
| 12. Keep the records | Name a custodian for tax, payroll and corporate records | A Delaware corporation can sue and be sued for 3 years after dissolution |

Source: [Carta: how to close a business (May 2024)](https://carta.com/learn/startups/exit-strategies/dissolution/)

## Failed startup? When to shut down, and the alternatives

Shutting down is common. In 2024, 966 US startups shut down, up from 769 in 2023, according to Carta data reported by [TechCrunch](https://techcrunch.com/2025/01/26/2025-will-likely-be-another-brutal-year-of-failed-startups-data-suggests). Those figures count only Carta customers that left because of bankruptcy or dissolution, and Carta's head of insights said he expects they miss a good chunk. Running out of cash is typically the proximate cause, he said; underneath are a lack of product-market fit, no path to positive cash flow and valuations too high to raise again.

Before deciding, compare the alternatives. [Carta](https://carta.com/learn/startups/exit-strategies/dissolution/) lists a pivot, an acquisition and new funding. When investors have decided not to fund, the options for winding down range from an informal approach to a public bankruptcy filing, [Cooley](https://www.cooleygo.com/running-out-of-cash-your-duties-and-options-for-winding-down/) explains:

| Route | How it works | Watch for |
| --- | --- | --- |
| Acquihire | A buyer hires the team and buys or licenses the IP | Most of the money usually goes to the hired founders as compensation ([Ashurst](https://www.ashurstperkinscoie.com/en/insights/tech-ma-recent-acquihires-in-the-tech-sector/)); see [acquihire vs selling startup data](https://origindatapartners.com/guides/acquihire-vs-selling-startup-data) |
| Informal wind-down | Find a buyer for the assets, lay off staff and stop operating, without formally ending the company | The lack of finality can leave legal loose ends |
| Corporate dissolution | A formal Delaware process, typically managed by an officer, that winds up the company's affairs, liquidates assets and ends its existence | Board and stockholder votes; the rest of this checklist |
| Assignment for the benefit of creditors | A professional assignee takes the assets and liquidates them for creditors; in California no court filing is involved | See [selling company data in an ABC](https://origindatapartners.com/guides/company-data-assignment-for-benefit-of-creditors) |
| Chapter 7 bankruptcy | A trustee takes control of all assets and directors lose decision-making authority | See [business bankruptcy and company data](https://origindatapartners.com/guides/business-bankruptcy-company-data) |
| Chapter 11 sale | Management stays in control as debtor in possession and can sell assets free and clear under section 363 | A higher-cost process that may need DIP financing |

Source: [Cooley GO: running out of cash, your duties and options for winding down (reviewed Sept 2025)](https://www.cooleygo.com/running-out-of-cash-your-duties-and-options-for-winding-down/)

## Board and investor approvals to dissolve a startup

Under [Delaware law](https://delcode.delaware.gov/title8/c001/sc010/index.html), a majority of the whole board adopts a resolution to dissolve, notice of it and of a stockholder meeting is mailed to each stockholder entitled to vote, and the dissolution passes if a majority of the outstanding voting stock votes for it. All voting stockholders can instead consent in writing without board action, and the resolution can let the board abandon the dissolution later without another stockholder vote.

Venture investors usually have more say than that majority. Preferred stock carries protective provisions, a list of actions the company cannot take without first getting stockholder approval, and liquidating or dissolving the company is a standard example ([Wilson Sonsini](https://www.wsgr.com/email/college-for-clients-series/2024/VC-Financing/PPT-2024-C4C-VC-Financing-Fundamentals.pdf)). Under the NVCA model documents, those investors vote separately as a class ([Faegre Drinker](https://www.faegredrinker.com/en/insights/publications/2022/9/cashing-in-getting-ready-for-your-series-a-round)). Read the charter and voting agreement before the board meets.

The board's duties shape the timing. Directors and officers of a Delaware corporation owe duties of care and loyalty to the corporation; once it is insolvent, creditors can bring derivative claims for breach of those duties, and the focus becomes maximising enterprise value ([Cooley](https://www.cooleygo.com/running-out-of-cash-your-duties-and-options-for-winding-down/)). If a bank or other secured lender is owed money, its right to foreclose on the assets could become a paramount consideration.

The resolution also starts a federal clock: file [Form 966](https://www.irs.gov/pub/irs-pdf/f966.pdf) within 30 days after the resolution or plan is adopted, with a certified copy attached. The plan of dissolution itself sets out how the company will wind down, settle its debts and distribute anything left ([Carta](https://carta.com/learn/startups/exit-strategies/dissolution/)). It should name:

- The last day of operations and the last payroll date.
- Who may sign filings, sell assets and deal with creditors once the team has gone.
- How claims will be handled: the Delaware section 280 notice route or a section 281(b) plan (see below).
- What happens to the code and records: sale, licence, retention or deletion.
- Who keeps the company's records afterwards, and where.

Source: [Delaware Code, Title 8, sections 271 to 285 (sale of assets, dissolution and winding up)](https://delcode.delaware.gov/title8/c001/sc010/index.html)

## How to tell investors, employees and customers

Surprising major investors with the decision to dissolve should be avoided at all costs, [Carta](https://carta.com/learn/startups/exit-strategies/dissolution/) advises. Engage them early, then tell employees, then customers and vendors, with the legal deadlines below setting the dates.

- Customer data: if customers store data with you, give them a date to export it and say when it will be deleted. Check each contract and your privacy policy for what you promised.
- Keep one channel open after the last day, such as a monitored email address, for creditors, customers and tax agencies.

| Who | What to tell them | Rule to know |
| --- | --- | --- |
| Investors | The challenges and options, early; then agree the decision and a plan for winding down and distributing any assets, and keep them updated | Preferred holders may need to approve; Delaware requires notice of the stockholder meeting to each voting stockholder |
| Employees | Why the company is closing, the layoff date, final payroll timing, any benefits or severance, and help finding new work | Federal WARN Act for covered closings; final-pay timing is set by state law |
| Customers | Thanks and a brief explanation; deliver outstanding work where possible; otherwise end contracts formally with clear instructions for transitions, refunds and data migration | Post a closure statement on the website and social channels too |
| Vendors | Terminate contracts and services early to stop costs; negotiate settlements where possible | Get a formal release of liability with any settlement |

Source: [Carta: how to close a business (May 2024)](https://carta.com/learn/startups/exit-strategies/dissolution/)

## Delaware dissolution and the section 280 and 281 claims process

Forms and fees for other states are in [how to dissolve a corporation](https://origindatapartners.com/guides/dissolve-a-corporation). For a Delaware startup:

Delaware will not dissolve a corporation until it has paid all franchise taxes, including for the entire calendar month in which dissolution takes effect, and filed all annual franchise tax reports, including a final one ([section 277](https://delcode.delaware.gov/title8/c001/sc010/index.html)). The certificate of dissolution costs $224, plus taxes to dissolve ([Delaware fee schedule](https://corpfiles.delaware.gov/Fee_Schedule/AugustFee2026.pdf)). Once it takes effect the corporation is dissolved, but it continues for 3 years to bring and defend lawsuits, settle its business, dispose of its property and distribute what remains ([section 278](https://delcode.delaware.gov/title8/c001/sc010/index.html)).

Dissolution does not erase debts. Delaware offers two ways to deal with claims, and directors who follow either are not personally liable to the dissolved corporation's claimants ([section 281](https://delcode.delaware.gov/title8/c001/sc010/index.html)):

- If assets fall short, claims are paid by priority, and ratably among claims of equal priority; any remaining assets go to stockholders ([section 281](https://delcode.delaware.gov/title8/c001/sc010/index.html)).
- Registered in other states too? File a withdrawal of foreign qualification in each one ([Carta](https://carta.com/learn/startups/exit-strategies/dissolution/)).
- The 3-year winding-up period lets a dissolved corporation still sell its property, which matters if a buyer for the code or records appears after the filing.

|  | Notice route (sections 280 and 281(a)) | Plan route (section 281(b)) |
| --- | --- | --- |
| What the company does | Mails notice by certified or registered mail to each known claimant and publishes it once a week for 2 consecutive weeks; a corporation with $10,000,000 or more in total assets also publishes in a national daily newspaper | Adopts a plan of distribution that pays or provides for known claims, pending lawsuits and claims likely to arise or become known within 10 years after dissolution |
| Claims deadline | No earlier than 60 days from the date of the notice; a claimant given actual notice who misses it is barred | No notice deadline; the plan must make provision reasonably likely to be sufficient for future claims |
| Rejected claims | Notice of rejection within 90 days of receiving the claim; the claimant then has 120 days to sue or the claim is barred | Not applicable |
| When stockholders can be paid | Not before 150 days from the last notice of rejection | After claims are paid or provided for under the plan |

Source: [Delaware Code, Title 8, sections 271 to 285 (sale of assets, dissolution and winding up)](https://delcode.delaware.gov/title8/c001/sc010/index.html)

## Final payroll, WARN notices and employee filings

The federal WARN Act requires written notice at least 60 calendar days before a covered plant closing or mass layoff. It applies to employers with 100 or more full-time employees, and a plant closing is one affecting at least 50 employees at a single site ([DOL employer's guide](https://www.dol.gov/sites/dolgov/files/ETA/Layoff/pdfs/_EmployerWARN2003.pdf)). The guide lists three exceptions to the full notice period: a faltering company, unforeseeable business circumstances and natural disasters. Several states go further; see the state table in the [closing a business checklist](https://origindatapartners.com/guides/closing-a-business-checklist#employees).

Federal law does not require an immediate final paycheck, but some states do ([U.S. Department of Labor](https://www.dol.gov/general/topic/wages/lastpaycheck)). California requires a discharged employee to be paid all wages, including accrued vacation, immediately at termination ([California Labor Commissioner](https://www.dir.ca.gov/dlse/faq_paydays.htm)).

- File the final Form 941 or 944 for the quarter final wages are paid, check the box saying the business has closed, and attach a statement naming who keeps the payroll records and where. Give employees their W-2s by that return's due date and file a final Form 940 ([IRS](https://www.irs.gov/businesses/small-businesses-self-employed/closing-a-business)).
- Pay withheld payroll taxes before other bills. Using available funds to pay other creditors while employment taxes go unpaid is an indication of wilfulness for the Trust Fund Recovery Penalty, and the IRS can then take collection action against personal assets ([IRS](https://www.irs.gov/businesses/small-businesses-self-employed/employment-taxes-and-the-trust-fund-recovery-penalty-tfrp)).
- Report payments to contractors on Form 1099-NEC.

Source: [U.S. Department of Labor: WARN Act employer's guide](https://www.dol.gov/sites/dolgov/files/ETA/Layoff/pdfs/_EmployerWARN2003.pdf)

## Cap table, SAFEs and convertible notes in a wind-down

What is left after the debts goes to investors in the order their documents set. Build the waterfall before promising anyone a distribution.

- The SAFE treats an assignment for the benefit of creditors as a Dissolution Event too, and keeps the investor junior to debt and creditor claims, including unconverted convertible notes ([SAFE form](https://bookface-static.ycombinator.com/assets/ycdc/Postmoney%20Safe%20-%20Valuation%20Cap%20Only%20-%20FINAL-f2a64add6d21039ab347ee2e7194141a4239e364ffed54bad0fe9cf623bf1691.docx)).
- The seniority of each later preferred series is negotiated in its financing, so check the charter ([Faegre Drinker](https://www.faegredrinker.com/en/insights/publications/2022/9/cashing-in-getting-ready-for-your-series-a-round)). If proceeds do not cover every preference, common stock receives nothing.

| Order | Who | What they are owed | Source |
| --- | --- | --- | --- |
| 1 | Creditors: employees, tax agencies, lenders, landlords, vendors | Paid or provided for first; if assets fall short, by priority and ratably within each priority | [Delaware Code, section 281](https://delcode.delaware.gov/title8/c001/sc010/index.html) |
| 2 | Convertible note holders | A note is debt, and debt is repaid before any equity if the company is wound down | [Y Combinator](https://www.ycombinator.com/safe/safe-vs-convertible-note) |
| 3 | SAFE holders and preferred stockholders (same rank) | SAFE: a shutdown is a "Dissolution Event", and on the valuation-cap SAFE the investor gets its purchase amount back, on par with preferred stock and other SAFEs and shared pro rata if proceeds fall short. Preferred: its liquidation preference, often a multiple of the original issue price (1x, 2x); non-participating preferred takes the greater of that or its as-converted value | [Y Combinator](https://www.ycombinator.com/safe); [SAFE form](https://bookface-static.ycombinator.com/assets/ycdc/Postmoney%20Safe%20-%20Valuation%20Cap%20Only%20-%20FINAL-f2a64add6d21039ab347ee2e7194141a4239e364ffed54bad0fe9cf623bf1691.docx); [Wilson Sonsini](https://www.wsgr.com/email/college-for-clients-series/2024/VC-Financing/PPT-2024-C4C-VC-Financing-Fundamentals.pdf); [Faegre Drinker](https://www.faegredrinker.com/en/insights/publications/2022/9/cashing-in-getting-ready-for-your-series-a-round) |
| 4 | Common stockholders: founders and employees who hold shares | Whatever remains | [Delaware Code, section 281](https://delcode.delaware.gov/title8/c001/sc010/index.html) |

Source: [Y Combinator: SAFE financing documents and FAQ](https://www.ycombinator.com/safe)

## Selling startup assets: IP, domains, code and customer contracts

In an informal wind-down the company typically tries to find a buyer for its assets before laying off staff ([Cooley](https://www.cooleygo.com/running-out-of-cash-your-duties-and-options-for-winding-down/)); in a dissolution, sales can continue through the 3-year winding-up period. The board decides, and selling all or substantially all of a Delaware corporation's assets also needs a resolution of the holders of a majority of the outstanding voting stock ([section 271](https://delcode.delaware.gov/title8/c001/sc010/index.html)).

- Sell before the engineers leave. AI buyers want the working history behind what shipped, not a product to relaunch ([Lazarus](https://lazarus.turing.com/)), and only the team can explain it.
- Wind-down services sell these assets too. SimpleClosure's AssetHub supports source code, workspace data, IP, talent and domains ([SimpleClosure](https://simpleclosure.com/product/assethub/)), and Sunset offers to sell, assign and auction remaining assets and IP ([Sunset](https://sunsethq.com/)).
- Report the sales on the final return: Form 4797 for business property, and Form 8594 if you sell the business ([IRS](https://www.irs.gov/businesses/small-businesses-self-employed/closing-a-business)).

| Asset | Likely buyers | What to check first |
| --- | --- | --- |
| Source code and repositories | Companies building in the same space; AI developers that license code with its history | Signed IP assignments from every employee and contractor; open-source licences in the repositories |
| Patents | Acquirers, competitors and patent buyers | Record the assignment with the USPTO: an unrecorded assignment is void against a later buyer without notice unless recorded within three months ([35 U.S.C. 261](https://www.law.cornell.edu/uscode/text/35/261)) |
| Domain names and brand | Companies in the same market | Keep the domain until customer notices and email forwarding are no longer needed; transfer it at the registrar |
| Customer contracts | Competitors that take over the customers | Assignment and termination clauses; customer consent where a contract requires it |
| Code and workspace data for AI training | micro1, Turing's Lazarus, SimpleClosure's AssetHub and Sunset (next section) | Rights to the data, personal information and who can sign |

Source: [Delaware Code, Title 8, sections 271 to 285 (sale of assets, dissolution and winding up)](https://delcode.delaware.gov/title8/c001/sc010/index.html)

## Selling a shut-down startup's data and records

A startup's Slack, email, tickets, documents and code now sell as AI training data. AI labs are buying data from dead startups to train their models, [MIT Technology Review](https://www.technologyreview.com/2026/10/13/1145755/ai-labs-buying-data-from-dead-startups-to-train-models/) reported in October 2026, and demand for defunct companies' data emerged suddenly last year. The CEO of Cielo24, a now-defunct software company, sold every Slack message, internal email and Jira ticket for "hundreds of thousands of dollars," [Fast Company reported](https://www.fastcompany.com/91528808/shuttered-startups-are-selling-old-slack-chats-and-emails-to-ai-companies). Published terms, checked November 2026:

- Proceeds are company money. They follow the same order as any asset sale, and MIT Technology Review reported that wind-down proceeds typically flow to senior creditors and investors, not employees.
- Personal data comes out. Suppliers scrub personally identifiable information and exclude HR records, according to MIT Technology Review. See [how to de-identify company data](https://origindatapartners.com/guides/de-identify-company-data-before-licensing).
- Compare the terms, not just the headline: one payment after acceptance, a share of every sale, or a percentage on success. The full comparison is in [who buys defunct company data](https://origindatapartners.com/guides/sell-defunct-company-data) and [SimpleClosure alternatives for selling startup data](https://origindatapartners.com/guides/simpleclosure-alternatives-selling-startup-data).

| Buyer or service | Who it takes | Published terms | Source |
| --- | --- | --- | --- |
| micro1: Defunct Company Data Partnership | Companies no longer operating; requirements listed as 30+ employees, 10+ countries, English, all industries | $100K to $3M+ for approved data packages | [micro1](https://www.micro1.ai/company-referral) |
| Turing: Project Lazarus | Active, winding-down or wound-down companies | Nothing upfront; paid on every sale; Turing is the only seller for the first 90 days | [Lazarus](https://lazarus.turing.com/) |
| SimpleClosure: AssetHub | Startups winding down, and companies still operating | No upfront cost; a percentage only if assets are sold or licensed; deals in the tens to hundreds of thousands of dollars | [SimpleClosure](https://simpleclosure.com/product/assethub/) |
| Sunset | Its wind-down clients | Licenses operating data to frontier AI labs after de-identification; no published price | [Sunset](https://sunsethq.com/) |

Source: [MIT Technology Review: AI labs buying data from dead startups (Oct 2026)](https://www.technologyreview.com/2026/10/13/1145755/ai-labs-buying-data-from-dead-startups-to-train-models/)

## Before you delete company systems, check what the records are worth

A startup shutdown usually ends by cancelling Slack, Google Workspace, GitHub, Jira and the CRM, and that deletes the records a buyer would pay for. Chat and CRM history can disappear within weeks of shutting off, Turing warns, though a wound-down company that kept exports or admin access can still sell ([Lazarus](https://lazarus.turing.com/)).

Checking the value takes minutes: [see what your startup's records are worth](https://origindatapartners.com/check-fit) from six questions about the company, before any system is cancelled.

- Keep one admin account on every system until the exports are done or a buyer has taken delivery.
- Check what an export includes. Slack's Free and Pro plans export public channels only; exporting private channels and direct messages needs a Business+ or Enterprise plan, and the workspace owner must apply. Free workspaces export links to files from the last 90 days only ([Slack](https://slack.com/help/articles/201658943-Export-your-workspace-data)).
- Write down what you hold: systems, years covered, peak headcount and rough volume. The [data inventory template](https://origindatapartners.com/blog/company-data-inventory-template) gives the columns, and [export company records before closing](https://origindatapartners.com/guides/export-company-records-before-closing) covers each system.

Source: [Turing: Project Lazarus](https://lazarus.turing.com/)

## Which records to keep after a startup shuts down

Selling or licensing records does not end the duty to keep them. Keep what supports each tax return until its period of limitations runs out, and check whether insurers or creditors need records longer ([IRS](https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records)). A Delaware corporation can sue and be sued for 3 years after dissolution ([section 278](https://delcode.delaware.gov/title8/c001/sc010/index.html)), so keep anything that would support or answer a claim at least that long.

- Name a custodian. The final Form 941 or 944 must say who keeps the payroll records and at what address.
- Keep a copy of anything you license or sell, and the agreement that covers it.

| Record | Keep for at least | Source |
| --- | --- | --- |
| Records supporting income tax returns | 3 years in most cases; 6 years if unreported income is more than 25% of the gross income shown; 7 years for a bad debt or worthless securities claim | [IRS](https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records) |
| Employment tax records | 4 years after the tax is due or paid, whichever is later | [IRS](https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records) |
| Property records | Until the period of limitations ends for the year you dispose of the property | [IRS](https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records) |
| Books and records for Form 966 | As long as their contents may become material in administering any tax law | [Form 966 instructions](https://www.irs.gov/pub/irs-pdf/f966.pdf) |
| Board minutes, stockholder consents, cap table and claims files | Through the 3-year winding-up period | [Delaware Code, section 278](https://delcode.delaware.gov/title8/c001/sc010/index.html) |

Source: [IRS: How long should I keep records?](https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records)

## Wind-down services vs a law firm vs doing it yourself: costs

Prices are only those each agency or provider publishes, checked November 2026. Where no price is published, the table says so; ask for written quotes.

- SimpleClosure's estimates are a competitor's view of the alternatives. Its guide puts bankruptcy highest, from $100,000 to more than $500,000.
- Starcycle states that it does not offer legal or financial advice, so pair a self-service route with counsel for the board, claims and creditor steps.
- A service that also sells the data takes a share of that sale. Ask for the rate in writing, and whether you can take the records to another buyer if no sale closes.

| Route | What it covers | Published price | Source |
| --- | --- | --- | --- |
| Do it yourself, with an accountant | Founders run the board process, filings, payroll and final returns | Delaware certificate of dissolution: $224 plus taxes; other costs not published | [Delaware fee schedule](https://corpfiles.delaware.gov/Fee_Schedule/AugustFee2026.pdf) |
| Law firm | Board and stockholder documents, section 280 notices, creditor negotiations, insolvency and fiduciary-duty advice | Not published | [Cooley](https://www.cooleygo.com/running-out-of-cash-your-duties-and-options-for-winding-down/) |
| SimpleClosure | Managed wind-downs for venture-backed startups; AssetHub sells code and workspace data | No price list. Its guide estimates a managed wind-down at $25,000 to $75,000, lower with a service like its own. AssetHub has no upfront cost and takes a percentage only on a sale | [SimpleClosure guide](https://simpleclosure.com/blog/strategy/managed-wind-down-vs-abc-vs-bankruptcy-guide/); [AssetHub](https://simpleclosure.com/product/assethub/) |
| Sunset | One team for legal, tax and operations, including investor distributions and final returns | "One team, one fee"; the fee is not published | [Sunset](https://sunsethq.com/) |
| Starcycle | Action plans, key-date tracking, contract and subscription management and document storage | Starting at $399 | [Starcycle](https://starcycle.ai/) |
| ABC assignee (insolvent companies) | An independent fiduciary takes and sells all assets for creditors | Not published by assignees; SimpleClosure's guide estimates $75,000 to $150,000 | [SimpleClosure guide](https://simpleclosure.com/blog/strategy/managed-wind-down-vs-abc-vs-bankruptcy-guide/) |

Source: [SimpleClosure: managed wind-down vs ABC vs bankruptcy (2026)](https://simpleclosure.com/blog/strategy/managed-wind-down-vs-abc-vs-bankruptcy-guide/)

## Startup wind-down timeline

A typical Delaware sequence; each rule is sourced in the sections above. SimpleClosure estimates the active work of a managed wind-down at 2 to 8 weeks, but the claims process and record-keeping run much longer.

| When | What | Rule |
| --- | --- | --- |
| 3 months or more before cash runs out | Board discusses the options with investors and counsel | Carta's recommended start |
| 60 days before the last working day | WARN notices, if the closing is covered | Federal WARN Act |
| Decision day | Board resolution; stockholder approval of the plan of dissolution | Delaware section 275 |
| Within 30 days of the resolution | Form 966 to the IRS | Form 966 instructions |
| Before any system is cancelled | Export the records, keep admin access, check their value | Chat and CRM history can disappear within weeks |
| Last working day | Final wages | Immediately on discharge in California; check your state |
| Before filing the certificate | Final franchise tax report; all franchise taxes paid | Delaware section 277 |
| Filing day | Certificate of dissolution | $224 plus taxes |
| Notice date | Section 280 notice mailed and published | Claims deadline at least 60 days later |
| Within 90 days of each claim | Accept or reject it | Section 280 |
| 150 days after the last rejection | Earliest distribution to stockholders on the notice route | Section 281(a) |
| 3 years after dissolution | Winding-up period ends unless the Court of Chancery extends it | Delaware section 278 |
| 4 years or more | Employment tax records may be discarded, if no other rule or dispute applies | IRS |


## Shutting down a startup outside the US

The legal steps follow the country where the company is registered. For an Indian private limited company, [closing a private limited company in India](https://origindatapartners.com/guides/close-a-private-limited-company-india) covers strike off and voluntary liquidation. The checklists for [the UK](https://origindatapartners.com/guides/close-a-limited-company-uk), [Canada](https://origindatapartners.com/guides/close-a-business-canada) and [Australia](https://origindatapartners.com/guides/close-a-company-australia) cover the rest.

The records question is the same everywhere. micro1's defunct-company track lists 10+ countries among its requirements ([micro1](https://www.micro1.ai/company-referral))

Source: [micro1: data partnership tracks, including the Defunct Company Data Partnership](https://www.micro1.ai/company-referral)

## Next step

Start with the plan of dissolution and one list of every investor, employee, creditor, contract and system. Before anything is cancelled, describe the records the startup holds: systems, years and volume. No export is needed to find out what they are worth. For the code-and-records question in a software shutdown, see [selling company data after closing](https://origindatapartners.com/guides/sell-company-data-after-closing) and [how Origin helps companies winding down](https://origindatapartners.com/who-we-help/companies-winding-down).

Origin Data Partners works with companies that own data and helps get it bought. We are independent of the services on this page, and a buyer may pay us when a deal closes ([how Origin is paid](https://origindatapartners.com/referral-disclosure)). [See what your data is worth](https://origindatapartners.com/check-fit).


## Questions and answers

### How do you shut down a startup?

Have the board and stockholders approve a plan of dissolution, with any separate preferred vote; file IRS Form 966 within 30 days; tell investors, employees and customers; pay final wages and give WARN notice if it applies; export the records and sell the assets; pay Delaware franchise taxes and file the certificate of dissolution; deal with claims through the section 280 notice or a section 281(b) plan; pay creditors, then investors; file final returns; and keep the records.

### How much does it cost to shut down a startup?

Delaware charges $224 plus taxes for a certificate of dissolution, and all franchise taxes must be paid first. Professional help is priced separately: SimpleClosure's own guide estimates a managed wind-down at $25,000 to $75,000, an ABC at $75,000 to $150,000 and bankruptcy from $100,000. Sunset charges one fee it does not publish, and Starcycle starts at $399. We found no published law-firm price.

### Do SAFE investors get their money back if a startup shuts down?

Only from what is left after debts. A shutdown is a "Dissolution Event" under the YC post-money SAFE: on the valuation-cap version the investor is owed its purchase amount back, junior to debt, including unconverted convertible notes, and on par with preferred stock and other SAFEs. If the money falls short, those holders share it pro rata.

### What happens to investors when a startup fails?

They are paid after creditors and note holders. Preferred stockholders and SAFE holders then share what is left according to their liquidation preferences, and common stock gets anything remaining, which is nothing if the preferences use up the proceeds. Preferred investors usually also have a separate vote on the dissolution itself.

### What happens when a startup fails?

Staff are laid off with final pay, the company sells what it can and pays creditors, and investors and founders receive only what remains. Unless the company formally dissolves, it keeps existing with its obligations, and an informal wind-down can leave legal loose ends. Its code and records can still be sold if they were exported before subscriptions lapsed.

### What does SimpleClosure do, and what are the alternatives?

SimpleClosure runs wind-downs for venture-backed startups and, through AssetHub, sells their code and workspace data, taking a percentage only if assets sell. It publishes no price list. Alternatives include Sunset (one fee, not published), Starcycle (from $399), a law firm, an ABC assignee for an insolvent company, or doing it yourself with an accountant.

### Can a shut-down startup sell its code and data?

Yes, if the records still exist and someone with authority signs. micro1 pays $100K to $3M+ for approved data packages from defunct companies with 30+ employees, Turing's Lazarus accepts wound-down companies that kept exports or admin access, and SimpleClosure's AssetHub and Sunset sell closing startups' data. A dissolved Delaware corporation can still dispose of its property during its 3-year winding-up period.

### How long does it take to wind down a startup?

The active work can take weeks: SimpleClosure estimates 2 to 8 weeks for a managed wind-down. The legal tail is longer. On Delaware's notice route, claimants get at least 60 days, rejected claimants 120 days to sue, and stockholders cannot be paid until 150 days after the last rejection; the corporation continues for 3 years to wind up. Carta advises starting at least three months before cash runs out.

## Sources

- [Delaware Code, Title 8, sections 271 to 285 (sale of assets, dissolution and winding up)](https://delcode.delaware.gov/title8/c001/sc010/index.html)
- [Delaware Division of Corporations: fee schedule (revised August 1, 2026)](https://corpfiles.delaware.gov/Fee_Schedule/AugustFee2026.pdf)
- [IRS: Form 966, Corporate Dissolution or Liquidation, with instructions](https://www.irs.gov/pub/irs-pdf/f966.pdf)
- [IRS: Closing a business](https://www.irs.gov/businesses/small-businesses-self-employed/closing-a-business)
- [IRS: How long should I keep records?](https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records)
- [IRS: Employment taxes and the Trust Fund Recovery Penalty](https://www.irs.gov/businesses/small-businesses-self-employed/employment-taxes-and-the-trust-fund-recovery-penalty-tfrp)
- [U.S. Department of Labor: WARN Act employer's guide](https://www.dol.gov/sites/dolgov/files/ETA/Layoff/pdfs/_EmployerWARN2003.pdf)
- [U.S. Department of Labor: Last paycheck](https://www.dol.gov/general/topic/wages/lastpaycheck)
- [California Labor Commissioner: paydays and final wages FAQ](https://www.dir.ca.gov/dlse/faq_paydays.htm)
- [Cooley GO: running out of cash, your duties and options for winding down (reviewed Sept 2025)](https://www.cooleygo.com/running-out-of-cash-your-duties-and-options-for-winding-down/)
- [Carta: how to close a business (May 2024)](https://carta.com/learn/startups/exit-strategies/dissolution/)
- [Wilson Sonsini: VC financing fundamentals (2024)](https://www.wsgr.com/email/college-for-clients-series/2024/VC-Financing/PPT-2024-C4C-VC-Financing-Fundamentals.pdf)
- [Faegre Drinker: getting ready for your Series A round (Sept 2022)](https://www.faegredrinker.com/en/insights/publications/2022/9/cashing-in-getting-ready-for-your-series-a-round)
- [Y Combinator: SAFE financing documents and FAQ](https://www.ycombinator.com/safe)
- [Y Combinator: SAFE vs convertible note](https://www.ycombinator.com/safe/safe-vs-convertible-note)
- [Y Combinator: post-money SAFE, valuation cap only (form)](https://bookface-static.ycombinator.com/assets/ycdc/Postmoney%20Safe%20-%20Valuation%20Cap%20Only%20-%20FINAL-f2a64add6d21039ab347ee2e7194141a4239e364ffed54bad0fe9cf623bf1691.docx)
- [35 U.S.C. § 261: ownership and assignment of patents (Cornell LII)](https://www.law.cornell.edu/uscode/text/35/261)
- [Slack: Export your workspace data](https://slack.com/help/articles/201658943-Export-your-workspace-data)
- [MIT Technology Review: AI labs buying data from dead startups (Oct 2026)](https://www.technologyreview.com/2026/10/13/1145755/ai-labs-buying-data-from-dead-startups-to-train-models/)
- [Fast Company: shuttered startups are selling old Slack chats and emails to AI companies (Apr 2026)](https://www.fastcompany.com/91528808/shuttered-startups-are-selling-old-slack-chats-and-emails-to-ai-companies)
- [TechCrunch: 2025 will likely be another brutal year of failed startups (Jan 2025)](https://techcrunch.com/2025/01/26/2025-will-likely-be-another-brutal-year-of-failed-startups-data-suggests)
- [Ashurst: recent acquihires in the tech sector (Aug 2024)](https://www.ashurstperkinscoie.com/en/insights/tech-ma-recent-acquihires-in-the-tech-sector/)
- [micro1: data partnership tracks, including the Defunct Company Data Partnership](https://www.micro1.ai/company-referral)
- [Turing: Project Lazarus](https://lazarus.turing.com/)
- [SimpleClosure: AssetHub](https://simpleclosure.com/product/assethub/)
- [SimpleClosure: managed wind-down vs ABC vs bankruptcy (2026)](https://simpleclosure.com/blog/strategy/managed-wind-down-vs-abc-vs-bankruptcy-guide/)
- [Sunset: startup wind-down services](https://sunsethq.com/)
- [Starcycle: business dissolution service for founders](https://starcycle.ai/)

## Related reading

- [Defunct company data: who buys it and on what terms](https://origindatapartners.com/guides/sell-defunct-company-data)
- [SimpleClosure review and alternatives: selling a shut-down startup's code and data](https://origindatapartners.com/guides/simpleclosure-alternatives-selling-startup-data)
- [How to dissolve a corporation: forms, fees and Form 966](https://origindatapartners.com/guides/dissolve-a-corporation)
- [Closing a software business: what could have value beyond the code?](https://origindatapartners.com/guides/sell-company-data-after-closing)
- [/who-we-help/companies-winding-down](https://origindatapartners.com/who-we-help/companies-winding-down)