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Do I have to pay Franchise Tax if my Delaware LLC hasn’t done any business?

By IncNow | Published November 19, 2015

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“I received a franchise tax notice from the State of Delaware. My Delaware LLC did not do any business last year, so why am I required to pay tax?”

Dear Customer,

The State of Delaware requires every LLC that is registered in the state to pay a flat fee of $300 each year to remain in Good Standing, regardless of business activity. Franchise “Tax” is often interpreted to mean that the fee will be calculated based on profits or capitalization, but that is not the case with Delaware LLC franchise tax. It may be better understood as a flat “maintenance fee”.

Franchise tax starts the year after your LLC is formed and is due on or before June 1 of every year. Failure to pay the tax will result in a $200 penalty in addition to the tax, plus interest and immediate loss of Good Standing status, so it’s important to pay the tax by the due date. If the LLC goes two years without paying state franchise tax, the company will automatically go void and require a costly renewal/revival if the Members decide they want the business to continue under the same name and keep the same formation date.

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When deciding where to form your company, consider that Delaware has advantages over your home state that may benefit you. Go