Delaware Franchise Tax: LLC vs Corp Explained

Every Delaware LLC owes an annual franchise tax, and misunderstanding it is one of the most common ways non-resident founders fall out of good standing. For LLCs the figure is refreshingly simple: a flat $300 due each June 1 under 6 Del. C. section 18-1107. This page explains that obligation clearly, contrasts it with the far more complex methods Delaware corporations face, and shows exactly when and how to pay so you never risk penalties.

What is the Delaware franchise tax for an LLC?

The Delaware LLC franchise tax is a flat $300 annual fee paid to the Delaware Division of Corporations under 6 Del. C. § 18-1107(b). The amount is the same whether your LLC made $0 or $50 million, whether it has one member or fifty members, whether you are a US resident or based in Bangladesh. It is due every year by June 1, starting the calendar year after formation. An LLC formed in 2026 owes its first $300 by June 1, 2027.

It is not an income tax. It is a flat franchise tax for the privilege of being a Delaware LLC. Delaware does not impose state income tax on LLCs whose income is earned outside Delaware (6 Del. C. Title 30 § 1126), and Delaware has no state-level sales tax. Most non-resident-owned Delaware LLCs owe only this $300 and have no other Delaware state tax obligation each year.

The $300 was set when Delaware moved LLCs to a flat-fee model years ago. There has been no announced legislative change to the rate as of May 2026, and Delaware Division of Corporations annual reports do not signal upcoming changes. The flat rate is part of what makes Delaware LLCs cheap to maintain compared to states like California ($800 minimum LLC tax per year regardless of revenue).

When is it due and how do you pay?

Due date: June 1 each year. You pay online at corp.delaware.gov by entering your Delaware file number and following the payment flow. The file number is the 7-digit identifier assigned when your Certificate of Formation was accepted; it appears on the Certificate itself and in your Delewarellc formation packet.

The payment portal accepts credit card and ACH. ACH is cheaper (no processing fee); credit card adds a small convenience fee. International cards are accepted but sometimes flagged for verification, which adds a day or two. Pay before May 25 to leave buffer for any payment failure to be re-tried before the June 1 deadline.

Most registered agents (Delewarellc included) send free reminders 30-60 days before June 1. Delewarellc sends reminders to every customer regardless of whether the customer renews registered agent service with us, because the cost of missing the deadline is so much higher than the cost of sending an email. Delewarellc provides free annual reminders for Delaware franchise tax (June 1 LLC), BOI reports, Form 5472, and foreign qualification renewals. Most competitors charge $99-$199/year for the equivalent.

How is Delaware Corporation franchise tax different?

Delaware Corporations have a more complex franchise tax with two calculation methods: Authorized Shares (minimum $175, codified at 8 Del. C. § 503) and Assumed Par Value Capital (minimum $400). The maximum under either method is $200,000 per year. Corporations must file a mandatory annual report by March 1, with a $50 filing fee. LLCs file neither an annual report nor authorized-shares calculations.

Practically, a single-member non-resident Delaware LLC pays $300 per year flat. A typical Delaware C-Corp with 10 million authorized shares ends up paying $1,000 to $5,000 per year under the Authorized Shares Method, or $400 minimum under the Assumed Par Value Method when the Corp chooses to recalculate. This is one reason non- resident bootstrap founders prefer LLCs over C-Corps unless they have a specific VC plan that requires C-Corp structure.

Delaware Corporation franchise tax: the Authorized Shares Method

Method 1, the Authorized Shares Method, calculates franchise tax from the number of authorized shares listed in your Certificate of Incorporation. The structure: $175 for the first 5,000 authorized shares, $250 for 5,001 to 10,000, then $85 per additional 10,000 shares above that, up to the $200,000 cap.

Most early-stage Delaware C-Corps authorize 10 million shares at formation (a common pattern in YC-style standard documents). Under the Authorized Shares Method, 10 million authorized shares produces a Year 1 franchise tax of approximately $85,165, which is shocking the first time you see it. This is exactly why founders should always check the Assumed Par Value Method, which usually drops the bill to a fraction of that amount.

Delaware Corporation franchise tax: the Assumed Par Value Method

Method 2, the Assumed Par Value Method, calculates franchise tax from the corporation's total gross assets and issued shares. The math: divide gross assets by total issued shares to get assumed par value; multiply that by total authorized shares to get assumed par value capital; multiply by $400 per million dollars (rounded up) to get the tax. Minimum is $400.

For early-stage Delaware C-Corps with few issued shares and modest assets, the Assumed Par Value Method drops the franchise tax to the $400 minimum. Most accountants recommend electing this method whenever it produces a lower number, which is almost always for pre-revenue or early-revenue startups. The Delaware online portal calculates both methods automatically and lets you pay whichever is lower.

Practical example: a Delaware C-Corp with 10 million authorized shares, 5 million issued shares, and $500,000 in gross assets. Authorized Shares Method = ~$85,165. Assumed Par Value Method = $400 minimum. Election: pay $400. The $84,765 savings is the difference between knowing about the Assumed Par Value Method and not knowing about it.

Free Delaware franchise tax calculator

A working franchise tax calculator will live at our calculator page in the next build. The calculator accepts entity type (LLC or Corporation), authorized shares, issued shares, and gross assets, then returns the LLC flat tax or the lower of Authorized Shares / Assumed Par Value methods for Corporations. It mirrors the math in Delaware's official corp.delaware.gov calculator.

Deadlines and the seasonal calendar

Two Delaware-mandated dates matter:

• March 1: Delaware Corporations only. Annual report + franchise tax due. $50 annual report filing fee plus franchise tax (Authorized Shares or Assumed Par Value method, whichever is lower). LLCs do not file March 1.
• June 1: Delaware LLCs only. Flat $300 franchise tax due. No annual report required.

Plan around these dates. Most non-resident bootstrap founders running Delaware LLCs have just one Delaware obligation per year (the $300 June 1), which is simpler than the Delaware Corporation case. If you also have federal Form 5472 obligation, that is due April 15 (or the 15th day of the 4th month after fiscal year end), with a six-month extension to October 15 available via Form 7004. The CPA usually handles the April 15 filing.

How to pay online at corp.delaware.gov

The official payment portal is at corp.delaware.gov. The flow:

1. Go to corp.delaware.gov and click "Pay Taxes/File Annual Reports."
2. Enter your Delaware file number (7-digit identifier from your Certificate of Formation).
3. The portal shows your entity name and the amount due. For LLCs, this is always $300.
4. Click "Proceed to Payment." Select ACH or credit card.
5. Enter payment details. Submit.
6. Save the confirmation. Print or screenshot for your records.

Total time on the portal: about 5 minutes for an LLC. Corporations take 15-30 minutes because of the annual report fields. Keep the confirmation for your records; banks occasionally ask for proof of good standing during account reviews.

What happens if you do not pay

Year 1 of non-payment: $200 penalty plus 1.5% monthly interest. Your LLC is "not in good standing" with Delaware. You cannot get a Certificate of Good Standing, which is sometimes required for foreign qualification, bank applications, or contract counterparty due diligence. The registered agent will typically send repeated reminders during this year.

Year 2 of non-payment: Delaware cancels the LLC. The registered agent can withdraw, the entity is officially dissolved by the state, and any bank accounts in the LLC's name become problematic when the bank does its next KYC refresh and finds the entity has been cancelled. Stripe accounts may freeze; counterparty contracts may be challenged because the LLC technically no longer exists.

Restoration requires a Certificate of Revival ($200 state fee) plus all back-owed taxes and penalties. The Revival process takes 1-2 weeks. Restoration is usually possible if you act within a few years of cancellation, but the accumulated penalties grow at 1.5% monthly compound interest, so the longer you wait the more expensive the revival.

What about Delaware state income tax?

Delaware does not impose state income tax on LLCs whose income is earned outside Delaware (6 Del. C. Title 30 § 1126). Most non-resident-owned Delaware LLCs have no Delaware nexus, so no Delaware state income tax applies. The franchise tax is the only Delaware state-level obligation.

Delaware does have a gross receipts tax that applies to businesses with Delaware nexus (a physical office, employees, or substantial sales activity in Delaware), but this rarely reaches non-resident-only LLCs. Delaware also does not have a state-level sales tax, which is unusual among US states and is one of the historical reasons Delaware became popular for holding-company structures.

Delaware Corporations doing business in Delaware are subject to the Delaware corporate income tax at 8.7% on in-state net income (6 Del. C. Title 30 § 1902), but this applies only to Delaware-source income. Non-resident-owned Delaware C-Corps with no Delaware operations also do not owe Delaware corporate income tax.

How Delaware's franchise tax compares to other states' annual LLC fees

A flat $300 per year sounds steep until you set it against what other US states charge LLCs annually. California's franchise tax minimum is $800 regardless of revenue. New York imposes a biennial publication requirement that runs $400 to $1,500 the first time plus a $50 statement of information every two years. Texas charges 0.375% to 0.75% of gross receipts above a $1.18 million threshold, plus an annual report. Most other states sit between $0 and $200 per year.

Annual LLC tax by state, 2026

Flat amount owed by every LLC every year, in USD. Delaware highlighted.

Delaware sits in an unusual middle ground. High enough that small DIY-only operations often pick Wyoming or New Mexico instead. Low enough that anyone planning to raise capital, sell to US enterprise customers, or run more than $50,000 in annual revenue still picks Delaware because of the case law, the Court of Chancery, and the pattern recognition by US investor counsel. For a non-resident SaaS founder running $200,000 in annual revenue, $300 is 0.15% of revenue, less than most accounting software. For an Amazon FBA operator running $30,000 in profit, $300 is 1% of profit, which feels different in a budget conversation. Delewarellc tells both founders the franchise tax is real and recurring before they pay for formation, so it never surprises anyone in Year 2.

Common confusions about the Delaware LLC franchise tax

Five questions we get on WhatsApp every cycle, with the plain-language answer for each.

• Is the franchise tax based on my revenue or my profit? Neither. It is a flat $300 regardless of revenue, profit, member count, or business activity. Whether your LLC made nothing or made $5 million, you owe $300.
• Do I owe it for the year I formed the LLC? No. The first $300 is due June 1 of the year following formation. An LLC formed any time in 2026 owes its first $300 on June 1, 2027. Form on December 31 and you still owe nothing until the following June.
• Can I write off the franchise tax as a business expense? Yes for US federal tax purposes. The $300 is a deductible state-tax expense reportable on Form 5472 plus pro forma Form 1120 for single-member foreign-owned LLCs, or on Form 1065 for multi-member LLCs. Whether it is deductible against your home-country tax depends on the home-country tax code; ask a local accountant.
• What if I cannot pay on time? Pay as soon as possible after June 1 to limit the penalty. The penalty is $200 flat plus 1.5% monthly interest on the unpaid $300. A 60-day late payment costs roughly $209 in extra cost on top of the $300 owed. Letting the obligation ride for 12 months adds about $254 in penalties and interest.
• Does the franchise tax apply if my LLC has no US activity? Yes. Delaware franchise tax is owed for the privilege of being a Delaware LLC, not for economic activity in Delaware. A non-resident-owned LLC with zero US activity owes the same $300 as one running $10 million in US revenue. This is the trade-off for using the Delaware framework.

The franchise tax over a five-year hold

A single number is easy to absorb, but the recurring shape is what matters for budgeting. A Delaware LLC formed in 2026 owes nothing in its formation year, then $300 every June 1 from 2027 onward. Over a five-year hold that is four payments of $300 between 2027 and 2030, totaling $1,200, plus the fifth due in 2031 if the company is still active. The figure never rises with revenue, so a founder can write it into a five-year plan as a fixed line and forget about volatility.

This predictability is the quiet advantage of the flat model. A California LLC owner planning the same five years budgets at least $800 a year, or $4,000 over the same window, and more once revenue crosses the state's surcharge thresholds. The Delaware franchise tax is one of the few business costs a non-resident founder can forecast to the dollar years in advance, which is why it belongs in the same fixed-cost row as the registered agent rather than in the variable column with payment processing and accounting.

Getting a Certificate of Good Standing

A Certificate of Good Standing is an official document from the Delaware Division of Corporations confirming that an LLC exists and is current on its franchise tax. Banks sometimes request it during account review, a counterparty may ask for it before signing a large contract, and it is required when qualifying the LLC to do business in another US state. The certificate costs $50 from the state and is issued only when the franchise tax is paid and the entity is in good standing.

This is the practical reason the June 1 payment matters beyond the penalty itself. An LLC that is even one day late and unpaid cannot obtain a Certificate of Good Standing, which can stall a bank review or a deal at the worst possible moment. Founders who expect to need the certificate, such as those planning to register in a second state, should pay the franchise tax early and keep the confirmation, because the certificate is generated against the live good-standing status rather than a past payment record.

Closing a Delaware LLC and the final franchise tax

Dissolving a Delaware LLC is a deliberate filing, not something that happens by walking away. To close cleanly a founder files a Certificate of Cancellation with the state, which carries a $200 fee, and the LLC must be current on all franchise tax through the year of cancellation before the state will accept it. An LLC that simply stops paying does not disappear. It accrues penalties and is eventually cancelled by the state on unfavorable terms rather than dissolved on the owner's terms.

The difference matters for anyone who might form a US entity later. A voluntary cancellation leaves a clean record, while a state-forced cancellation for unpaid tax leaves back taxes and penalties that follow the entity and can complicate a future revival. The correct sequence to close is to settle any final franchise tax, file the Certificate of Cancellation, close the bank accounts, and keep the records for the period a home-country or US tax authority might still ask about them.

What non-residents get wrong about the June 1 deadline

The deadline itself is simple, but three things trip up founders abroad. The first is time zone. June 1 follows US Eastern time, so a founder in Asia who waits until their own June 1 evening may already be past the cutoff. The second is payment failure. International cards are sometimes flagged by the Delaware portal for verification, and a card that bounces on May 31 leaves no time to retry. The third is the assumption that the registered agent pays the tax automatically, which most do not. The agent sends a reminder, but the payment is the owner's responsibility.

The fix for all three is the same. Pay in the second half of May rather than at the end, use an ACH transfer or a card known to work with US government portals, and confirm the payment posted rather than assuming it did. A founder who treats May 25 as the personal deadline removes nearly all of the risk that turns a $300 obligation into a penalty.

How the franchise tax fits with your other yearly costs

The franchise tax is one line in a small annual stack, and seeing the whole stack prevents surprises. For a foreign-owned single-member LLC the recurring yearly costs are the $300 Delaware franchise tax, the registered agent renewal of roughly $50 to $99, and the CPA fee of $200 to $500 for the Form 5472 and pro forma Form 1120 federal information return. There is no Delaware annual report for an LLC, no Delaware income tax on income earned outside the state, and no Delaware sales tax.

That puts a typical all-in annual cost between about $400 with no CPA and $900 with one, a figure laid out in full on our Delaware LLC cost page. The franchise tax is the most fixed of these, the registered agent is the most negotiable, and the CPA fee is the one most worth keeping because the penalty it prevents, $25,000 for a missed Form 5472, dwarfs every other number in the stack. Reading the franchise tax in isolation understates how cheap the Delaware side of the structure actually is.

Why Delaware charges LLCs a flat fee at all

The flat $300 looks arbitrary until it is read as a deliberate policy choice. Delaware earns a meaningful share of state revenue from entity fees, and a flat franchise tax on LLCs is simple to administer and predictable for the businesses that pay it. Unlike the corporation franchise tax, which scales with authorized shares to capture larger companies, the LLC fee is a single number because the LLC is the structure most often used by small and closely held businesses for which a complex calculation would add cost without raising much revenue.

For a non-resident founder the rationale is less important than the consequence: the fee does not grow as the business does, so success is not punished with a larger Delaware bill. That stability, combined with the absence of an LLC annual report, is part of why Delaware remains a default even though cheaper states exist. The founder is paying for legal certainty and recognition, and the flat franchise tax is the modest, predictable price of staying inside that system.

Franchise tax and your home country taxes

The Delaware franchise tax is a US state fee, and how it interacts with a founder's home country depends entirely on that country's rules. For US federal purposes the $300 is a deductible business expense, reported on the Form 5472 with a pro forma Form 1120 for a single-member foreign-owned LLC or on the Form 1065 for a multi-member LLC. That deduction reduces US-side taxable income, though most non-resident-owned LLCs with no US-effectively-connected income have little or no US taxable income to begin with.

Whether the fee is deductible at home is a separate question answered by the home-country tax code, not by Delaware. A founder whose country treats the US LLC as transparent may be able to deduct the fee against the business income they already report locally, while a founder whose country treats the LLC as a foreign company may handle it differently. The franchise tax is small enough that its tax treatment rarely changes a decision, but it belongs in the same conversation with a local accountant that covers how the LLC's profit is taxed at home.