Table of Contents
Introduction
Got a business incorporated in Delaware? Then you’ve got one annual task that can’t be skipped, filing your Delaware franchise tax.
A lot of founders miss it, especially early on. Some think they don’t need to file if they haven’t made any money yet. But that’s not how Delaware works. The tax is still due every year, no matter what stage your company’s at.
And if you ignore it? You could end up with late fees, interest piling up, or even risk losing your company’s good standing with the state. It sounds like a hassle, but don’t worry- it’s manageable.
Here’s how to stay on top of it.
Are you confident your business tax filings are fully optimized and compliant?
What Is the Delaware Franchise Tax?
The Delaware franchise tax is not a tax on your income or profits. It’s a fee for the privilege of incorporating in Delaware, a state that’s popular among founders for its business-friendly laws and strong legal framework.
Both corporations and LLCs need to pay it:
- Corporations must file an annual report and pay tax based on either their authorized shares or assumed par value capital.
- LLCs and other entities (like LPs and GPs) must pay a flat state of Delaware LLC franchise tax of $300.
The tax is mandatory, even if your company didn’t do business last year.
Delaware Franchise Tax Filing Deadlines
Mark your calendars. Here’s when you need to act:
Corporations:
File your annual report and pay your corporation tax in Delaware by March 1 each year.
LLCs, LPs, GPs:
The due date for the Delaware franchise tax is June 1 every year. No report is required, just pay the flat tax.
Missing these deadlines can lead to serious consequences, including hefty fees and even the administrative dissolution of your company.
What Do You Need to File?
For Corporations:
You’ll need to file:
- An Annual Report
- Your Delaware franchise tax is calculated using one of two methods:
- Authorized Shares Method: Based on the number of shares your corporation has.
- Assumed Par Value Capital Method: Based on your corporation’s assets and issued shares.
Most startups save money with the Assumed Par Value method—but you need to do the math to be sure.
For LLCs:
You only need to pay the state of Delaware LLC franchise tax ($300 flat fee). No annual report is required.
How to Pay the Delaware Franchise Tax
Paying your Delaware franchise tax is a straightforward process, but you need to use the correct portal and enter accurate information.
For Corporations:
- Go to the Delaware Division of Corporations Franchise Tax Filing page.
- Click on “File Annual Report and Pay Tax.”
- Enter your 7-digit Business Entity File Number (you can find it here by searching your company name).
- Fill in the required details, like your authorized shares or par value.
- Choose the tax calculation method (Authorized Shares or Assumed Par Value Capital).
- Submit the annual report and pay using a credit card or ACH.
For LLCs:
- Visit the Delaware Department of Revenue Franchise Tax payment portal.
- Click on “Pay LLC/LP/GP Tax.”
- Enter your Business Entity File Number.
- Pay the flat $300 state of Delaware LLC franchise tax via credit card or electronic check.
💡 Note: Keep a copy of your receipt and filing confirmation for your records. Delaware doesn’t always email confirmations, so saving a PDF is a smart move.
Filing Tips: Avoid Mistakes & Save Time
Here are five ways to stay ahead of your Delaware filings and reduce unnecessary costs.
1. Use the Correct Tax Method (Corporations Only)
Choosing between the two tax methods can significantly affect how much you pay. Many early-stage companies overpay simply because they default to the Authorized Shares Method.
💡 How to reduce Delaware franchise tax?
Use the Assumed Par Value Capital Method if your company has a high number of authorized shares but relatively low assets. Tools like Delaware’s Franchise Tax Calculator can help.
2. Set Filing Reminders
Don’t wait for a notice. Delaware doesn’t always send reminders, and the due date for Delaware franchise tax arrives faster than you think. Use calendar alerts or email nudges to stay ahead.
3. Double-Check Company Info
Make sure your share count, asset value, and contact details are current. Errors here can trigger tax overpayment or rejected filings.
4. Pay Early, Not Just On Time
Paying early gives you room to correct errors or respond to any processing hiccups. Don’t cut it close.
5. Work with a Pro
When you are uncertain about using a method or your filings being error-free, only a pro can make you stand out. A trusted accounting partner (like us!) can save you from costly mistakes and handle the process smoothly.
What If You Miss the Deadline?
Let’s clear up some of the top questions businesses ask about late filing:
What is the late fee for the Delaware franchise tax?
For corporations: $125 late fee + 1.5% monthly interest
For LLCs: $200 late fee + 1.5% monthly interest
What happens if I don’t pay the Delaware franchise tax?
Your business loses its good standing in the state, which can block you from fundraising, signing deals, or even dissolving properly.
What is the penalty for filing taxes late in Delaware?
Late filing leads to fees, interest, and the risk of administrative dissolution—Delaware can shut your company down if you ignore these filings.
Do I need to file an annual report for my LLC in Delaware?
No. Only corporations file annual reports. LLCs only need to pay the $300 state of Delaware LLC franchise tax each year.
Orbit Can Help You File- Right and On Time!
Filing the Delaware franchise tax isn’t exactly fun, but it’s something that has to get done. If it’s your first time or you just don’t want to deal with the back and forth, we can help.
At Orbit Accountants, we’ve worked with a bunch of businesses; some just starting, others already growing fast. We take care of the tax stuff, pick the right method if there’s a choice, and make sure it’s filed properly.
You don’t have to figure it all out on your own.
If you’re cutting it close or just don’t want to risk getting it wrong, reach out to us. We’ll handle it.
Final Thought
Delaware doesn’t mess around with this stuff. Whether you’re running a small operation or something bigger, missing your corporation tax Delaware filing can mess things up- penalties, delays, even losing good standing.
It’s not hard when you stay ahead of it. Just know the dates, know what you owe, and don’t wait till the last minute. If you’ve got someone helping out, even better.
That’s it. Stay clear, stay compliant, and keep your business moving forward.
Frequently Asked Questions
What’s the late fee if I miss the Delaware franchise tax deadline?
If you’re running a corporation, the state charges a $125 penalty, plus monthly interest at 1.5% on whatever you owe. LLCs face a flat $200 late fee, along with the same monthly interest rate.
What if I don’t end up paying the Delaware franchise tax?
Missing the payment puts your company at risk of losing its good-standing status with the state. That can create problems when you’re trying to fundraise, expand into other states, or officially close your business. Over time, the state could even take steps to dissolve your company altogether.
How to reduce Delaware franchise tax?
If you’re a corporation, use the Assumed Par Value Capital Method instead of the default Authorized Shares Method. It often results in a lower tax bill, especially if you have many authorized shares but low assets. You can use Delaware’s online tax calculator to compare both methods.
Do I need to file an annual report for my LLC in Delaware?
LLCs in Delaware don’t have to worry about filing an annual report. All that is required is to pay the $300 franchise tax by June 1 each year to stay compliant.
What is the penalty for filing taxes late in Delaware?
Corporations face a $125 penalty plus interest. LLCs face a $200 penalty plus interest. These fees increase the longer you wait, and your business could be at risk of dissolution if you delay too long.
