Introduction
Delaware is a top choice for businesses due to its strong corporate laws and tax-friendly environment. However, all LLCs, corporations, and limited partnerships (LPs) registered in Delaware must pay an annual franchise tax to remain in good standing.
This guide explains who needs to pay Delaware franchise tax, how much it costs, how to file, and what happens if you miss the deadline.
What Is Delaware Franchise Tax?
- A mandatory tax for all Delaware-registered LLCs, corporations, and LPs.
- Does not depend on revenue or profits—it is required even if the business made no money.
- Failure to pay on time can lead to penalties and loss of good standing.
Who Pays Delaware Franchise Tax?
- LLCs & Limited Partnerships (LPs) – Flat $300 per year.
- Corporations – Tax is based on the number of authorized shares (minimum $175, maximum $200,000).
- Nonprofit Corporations – Flat $25 per year.
How Much Is Delaware Franchise Tax?
For Delaware LLCs and LPs
- Flat fee of $300 per year (regardless of revenue or profits).
- Due by June 1 each year.
For Delaware Corporations
Corporations can calculate franchise tax using one of two methods:
| Calculation Method | Tax Due |
|---|---|
| Authorized Shares Method | Starts at $175, up to $200,000 |
| Assumed Par Value Capital Method | Based on issued shares & assets, with a minimum of $400 |
Minimum corporate franchise tax: $175
Maximum corporate franchise tax: $200,000
- The Assumed Par Value Capital Method is often used to reduce tax liability for corporations with high authorized shares.
For Nonprofits
- Flat $25 per year
- Delaware Franchise Tax Deadlines
| Business Type | Due Date | Late Penalty |
|---|---|---|
| LLCs & LPs | June 1 | $200 penalty + 1.5% monthly interest |
| Corporations | March 1 | $200 penalty + 1.5% monthly interest |
| Nonprofits | March 1 | $125 penalty + 1.5% monthly interest |
Failure to pay on time results in penalties and potential loss of good standing.
How to File and Pay Delaware Franchise Tax
For LLCs & LPs
- Visit the Delaware Division of Corporations website.
- Enter your business file number.
- Review tax due ($300 flat fee).
- Make payment via credit card or bank transfer.
For Corporations
- Choose a calculation method (Authorized Shares Method or Assumed Par Value Capital Method).
- Log into the Delaware Division of Corporations website.
- Enter business details and calculate tax.
- Pay via credit card or ACH transfer.
What Happens If You Don’t Pay Delaware Franchise Tax?
- $200 late penalty, plus 1.5% interest per month on unpaid taxes.
- Loss of good standing, affecting contracts, financing, and business operations.
- Possible administrative dissolution, leading to additional reinstatement fees.
How to Reduce Delaware Franchise Tax
- Corporations with high authorized shares can use the Assumed Par Value Capital Method to reduce tax liability.
- LLCs cannot reduce the flat $300 fee.
- Nonprofits always pay a flat $25 fee.
Delaware Franchise Tax vs. Corporate Income Tax
| Tax Type | Who Pays It? | Amount | Due Date |
|---|---|---|---|
| Franchise Tax | All LLCs, LPs, and corporations | $300 (LLCs), $175+ (corporations) | March 1 (corporations), June 1 (LLCs & LPs) |
| Corporate Income Tax | Only corporations with business operations in Delaware | 8.7% on net income | April 15 |
- Franchise tax applies to all businesses registered in Delaware, even if they don’t operate there.
- Corporate income tax applies only to corporations actively doing business in Delaware.
IRS Compliance & Business Tax Filings for Delaware Companies
- Form 1120 – C-Corporations must file a federal tax return.
- Form 1120S – S-Corporations must file an S-Corp tax return.
- Schedule C (Form 1040) – Single-member LLCs report income as sole proprietors.
- Form 1065 – Multi-member LLCs and partnerships file an informational return.
Conclusion
Delaware requires all LLCs, LPs, and corporations to pay franchise tax, even if they do not conduct business in the state. Missing the deadline results in penalties and potential loss of good standing.
For expert franchise tax compliance, schedule a meeting with our CPA Anshul Goyal by clicking at https://calendly.com/anshulcpa/ now.
Frequently Asked Questions (FAQs)
1. Who must pay Delaware franchise tax?
All LLCs, limited partnerships (LPs), and corporations registered in Delaware must pay franchise tax.
2. How much is Delaware franchise tax?
- LLCs & LPs: Flat $300 per year.
- Corporations: Minimum $175, maximum $200,000, based on authorized shares.
- Nonprofits: Flat $25 per year.
3. When is Delaware franchise tax due?
- March 1 for corporations.
- June 1 for LLCs & LPs.
4. What happens if I don’t pay Delaware franchise tax?
- $200 penalty, plus 1.5% monthly interest.
- Loss of good standing, which may affect contracts and business operations.
- Possible administrative dissolution if left unpaid for an extended period.
5. Can I reduce Delaware franchise tax?
- Corporations can lower tax using the Assumed Par Value Capital Method.
- LLCs and LPs must pay the flat $300 fee.
About Our CPA
Anshul Goyal, CPA EA FCA is a licensed Certified Public Accountant and an IRS Enrolled Agent (EA). He specializes in Delaware business tax compliance, franchise tax filing, and corporate tax strategies.
Schedule a consultation today with Anshul Goyal, CPA, for expert tax guidance.