When Is the Delaware LLC Franchise Tax Due?
Navigate the essential annual requirements for your Delaware LLC's financial health and legal standing. Ensure compliance with state obligations.
Delaware Limited Liability Companies (LLCs) offer a flexible business structure. Maintaining an LLC in good standing requires adherence to specific annual state obligations. Understanding these requirements ensures compliance and avoids potential issues.
The Delaware LLC Franchise Tax
The Delaware LLC Franchise Tax is an annual fee mandated by Delaware for all LLCs registered within its jurisdiction. This tax is a flat fee of $300 per year, irrespective of the LLC’s income generation or business activity. It functions as a maintenance fee to preserve the entity’s legal existence in Delaware. This annual tax is distinct from any income tax obligations your LLC might have. Unlike corporations, Delaware LLCs are not required to file an annual report with the state; their primary annual state-level obligation is the payment of this franchise tax.
When the Tax is Due
The Delaware LLC Franchise Tax is due annually on June 1st. This deadline applies to all LLCs registered in Delaware, regardless of their formation date in the previous calendar year. For instance, the tax due on June 1st of the current year covers the previous calendar year’s obligation. Meeting this deadline avoids penalties. The state does not prorate the tax based on the formation date within the year. Timely payment maintains good standing with the Delaware Division of Corporations.
How to Pay the Franchise Tax
Paying the Delaware LLC Franchise Tax is a straightforward process conducted entirely online. The Delaware Division of Corporations provides a dedicated portal for this purpose. Business owners will need their LLC’s nine-digit Business Entity File Number to access the payment system.
Upon entering the file number, the system will display the amount due. Payment options include electronic checks (ACH debit) or major credit cards. After selecting the preferred payment method and inputting the necessary details, the submission is completed through the online portal.
What Happens If You Don’t Pay
Failure to pay the Delaware LLC Franchise Tax by the June 1st deadline results in immediate penalties. A late fee of $200 is assessed, in addition to interest calculated at 1.5% per month on both the unpaid tax and the penalty. These charges accrue until the outstanding balance is settled.
Beyond financial penalties, non-payment leads to a loss of “good standing” status with the State of Delaware. An LLC not in good standing cannot obtain a Certificate of Good Standing, which is often required for various business activities, such as opening bank accounts or registering to do business in other states.
If the non-payment of the franchise tax persists for three consecutive years, the LLC’s Certificate of Formation may be administratively canceled by the state. This “voided” status means the company loses its legal standing, preventing it from making any filings with the state or suing in Delaware courts. The company’s name may also become available for use by other entities.