Choosing Delaware as the home for your business entity comes with a unique set of tax obligations; most importantly, the Delaware Franchise Tax. Whether your company operates within the state or elsewhere, if your LLC, LP, or GP is formed in Delaware, you must pay this fee to maintain your corporate status. Understanding how Delaware Franchise Tax works, who it applies to, and how it’s calculated is essential for staying compliant, avoiding penalties, and ensuring your business remains in good standing with the state of Delaware.
What is Delaware Franchise Tax?
All Delaware Limited Liability Companies (LLCs), Limited Partnerships (LPs), and General Partnerships (GPs) are required to pay an annual franchise tax by June 1st every year. These entity designations are not required to file an annual report with the Delaware Division of Corporations; only the tax payment is necessary to remain in good standing.
The franchise tax payment is due regardless of whether the business is active or generates income. It is important to note that LLCs are taxed in arrears, meaning the taxes due each year are for the previous calendar year. They are not prorated.
How Much is the Delaware Franchise Tax?
LPs, LLCs, and GPs are required to pay an annual franchise tax of $300.00. Taxes for these entities are due on or before June 1st of each year. The penalty for non-payment or late payment is $200.00. Interest accrues on both the tax and penalty at the rate of 1.5% per month.
How do I pay my Delaware Franchise Taxes?
Entities can pay their Franchise Tax directly at https://corp.delaware.gov/frtax/.Payment can be made online using a bank account or a credit card.
The Delaware team at Corp1 can pay the taxes on your behalf for an additional service fee ($10 per $100). We can also use the entity’s credit card, waiving the additional cost, or our depository account to pay.
Do I Need to Pay Franchise Taxes if My Company is Not Active?
Yes, you must pay the Delaware franchise tax for your LLC, LP, or GP even if your company is inactive or has not conducted business. Delaware imposes this tax as a flat annual fee to maintain your entity’s legal status in the state, regardless of business activity or income.
Late fees will apply, as discussed, and continued non-payment for three consecutive years will result in the entity being administratively canceled by the state, and you will lose your company’s good standing and legal protections.
What Happens if I Miss the Deadline?
Don’t let a $300 payment become a $500 problem by missing the deadline! Penalty for non-payment or late fee is $200.00. Interest accrues on both the tax and penalty at the rate of 1.5% per month. Failure to pay franchise taxes will result in penalties, loss of good standing, and eventual administrative dissolution of the entity.
Beware of Tax and Annual Report Scams
Please note: The Secretary of State’s Office works closely with the Attorney General’s Office to investigate deceptive solicitations. If a Delaware business entity received such a solicitation or sent payment as a result of receiving a solicitation, please complete a complaint form and immediately contact the Consumer Protection Unit of the Attorney General’s Office at (302) 577-8600 or 1-800-220-5424. Please get in touch with the Delaware Division of Corporations at (302) 739-3073 if you have any questions or concerns regarding a solicitation.
The Importance of a Registered Agent and Timely Tax Payments
A registered agent is an individual or entity designated by a corporation, nonprofit, or LLC to receive service of process, tax notices, information, and other necessary correspondence. A professional registered agent serves as your business’s official point of contact with the state, ensuring you receive essential legal documents, tax notices, and compliance communications promptly and securely. The agent also provides a layer of privacy by keeping legal correspondence separate from your primary business address.
Delaware law requires every entity to appoint a registered agent with a physical office address in the state. If the entity is not physically located in Delaware, it must designate a registered agent to meet this requirement. Registered agents are responsible for accepting service of process and providing information for billing and tax obligations to the entities they represent.
No Need to Stress About Franchise Tax Due Dates!
Corp1 provides an annual report and franchise tax monitoring service in conjunction with our partner SingleFile. The annual report filing service can be bundled with your registered agent service or purchased individually. SingleFile’s service ensures that your franchise taxes and annual reports are filed automatically, accurately, and on time.
For assistance in all 50 states, speak with a team member in any office, or contact us to schedule a convenient time.
Resources: Delaware.gov, DE Consumer Alerts,