Delaware franchise tax

An annual flat $300 tax due June 1 for Delaware LLCs; variable for Delaware Corporations using Authorized Shares or Assumed Par Value methods.

Definition

Under 6 Del. C. § 18-1107(b), every Delaware LLC pays a flat $300 annual franchise tax due June 1, regardless of revenue or member count. Delaware Corporations use different rules under 8 Del. C. § 503, with two calculation methods (Authorized Shares minimum $175, Assumed Par Value minimum $400, maximum $200,000).

Context

Delaware LLCs do not file an annual report (unlike Delaware Corporations, which must file by March 1). The $300 LLC franchise tax is paid online at corp.delaware.gov by entering the entity's Delaware file number. Delewarellc sends free reminders 30-60 days before the deadline.

Example

A Delaware LLC formed in May 2026 owes its first $300 franchise tax by June 1, 2027. Payment is made online at corp.delaware.gov in about 5 minutes.

Common pitfalls

Missing June 1 triggers $200 penalty plus 1.5% monthly interest.
Two consecutive years of non-payment triggers state-level entity cancellation.
Restoring a cancelled LLC requires a Certificate of Revival plus all back-owed taxes.

What the Delaware franchise tax actually is

The phrase franchise tax confuses many non-resident founders because it sounds like a tax on a franchise business or a tax tied to revenue. For a Delaware LLC it is neither. It is a flat annual fee the state charges simply for keeping your entity on the active rolls of the Division of Corporations. The amount for a standard LLC is $300, and it does not move whether your company earned nothing all year or generated several hundred thousand dollars. It is best understood as the price of continued legal existence in Delaware, not a levy on profit. This distinction matters because founders sometimes assume they can skip the payment in a year with no income, which is a misreading of how the obligation works.

The word tax here is a label of historical convenience rather than a description of an income tax. Delaware does impose corporate income tax on companies doing business inside the state, but a foreign-owned LLC that has no Delaware operations, no Delaware office, and no Delaware customers does not pay Delaware income tax on that basis. The $300 franchise tax is separate and unconditional. Thinking of it as a membership fee for staying in good standing is closer to the practical reality than thinking of it as a tax in the everyday sense of the word.

Because the figure is fixed, budgeting becomes predictable. A single-member foreign-owned LLC and a large multi-member operating company both pay the same $300 if they are organized as LLCs. That flat structure is one reason the Delaware LLC remains a common choice for founders who want a known, small, recurring state cost rather than a sliding scale that grows with the business.

Why June 1 is the date that governs everything

Every Delaware LLC franchise tax payment is due on June 1 of each year. This single date applies to all LLCs regardless of when in the calendar they were formed. A company organized in January and one organized in November both face the same June 1 deadline for the relevant cycle. The fixed date simplifies planning but also catches founders who assume the deadline tracks their formation anniversary the way some other states structure their fees. It does not. The Delaware LLC clock is keyed to the calendar, and June 1 is the recurring marker.

The first payment a new LLC owes arrives in the year after formation. An LLC formed during 2026 will generally see its first $300 franchise tax due on June 1, 2027. That gap can lull a founder into forgetting the obligation entirely, because the first deadline can feel far away during the busy early months of setting up banking and operations. Building a reminder into a calendar at formation, rather than relying on memory a year later, is a practical habit that prevents the late penalties described elsewhere in this entry.

The payment itself is made online through the state portal at corp.delaware.gov using the entity's Delaware file number, and the process typically takes only a few minutes. There is no annual report to assemble for an LLC, which keeps the June 1 task narrow. The founder enters the file number, confirms the entity, and pays the flat amount. Keeping the confirmation receipt is sensible because it serves as proof of payment if a question about good standing later arises.

How it applies to a single-member foreign-owned LLC

A non-resident who owns 100% of a Delaware LLC is in the most common situation we see, and the franchise tax treatment is refreshingly simple for that profile. The $300 is owed in full. There is no reduced rate for a sole owner, no discount for being based abroad, and no proration for a dormant year. The flat fee does not look at where the owner lives, what passport they hold, or whether the company has a US bank account yet. The obligation attaches to the Delaware entity, not to the person behind it.

This is a point worth stressing because a single-member LLC owned by a foreign person is, by default, treated as a disregarded entity for US federal tax purposes. That federal classification affects income tax filings and the separate Form 5472 reporting obligation, but it has no bearing on the Delaware franchise tax. The two systems run on parallel tracks. The Delaware franchise tax is a state-level existence fee, while the federal reporting flows through the Internal Revenue Service. A founder can owe the $300 to Delaware in a year where the company had zero US-source income and still files a pro forma 1120 with Form 5472 at the federal level.

Practically, the non-resident founder should treat the franchise tax as a fixed line item that recurs every June 1 for as long as the LLC stays open. It is one of the small handful of unavoidable annual costs of keeping a Delaware LLC alive, alongside the registered agent fee. Neither depends on whether the business traded during the year.

A worked example across the first three years

Consider a founder in Lagos who forms a single-member Delaware LLC in May 2026 to sell software subscriptions to US customers. The Certificate of Formation costs $110 to file with the state, and a formation package such as the $297 one-time service handles the paperwork. In 2026 the founder owes no franchise tax yet, because the first payment lands the following year. The company spends the rest of 2026 obtaining its EIN, which arrives roughly 8 to 10 business days after the SS-4 is processed, and opening an account with a provider like Mercury or Wise.

On June 1, 2027 the first $300 franchise tax comes due. The founder logs into corp.delaware.gov, enters the file number, and pays. Suppose the business had a slow first year and earned only a few thousand dollars. The franchise tax is still exactly $300, unchanged by the modest revenue. On June 1, 2028 another $300 is due, and the pattern repeats. If by 2028 the company is generating six figures, the franchise tax is still $300, because it never scales with income for an LLC.

Now imagine the founder forgets the 2028 deadline and pays in August instead. Delaware adds a $200 late penalty plus interest accruing at 1.5% per month on the balance. What should have been a $300 task becomes more than $500 plus accumulating interest. This example shows why the flat fee is easy to manage when tracked and surprisingly costly when ignored, even though the underlying tax never changed.

The penalty structure and how interest compounds

Missing the June 1 deadline does not simply roll the bill forward at the same price. Delaware imposes a $200 penalty the moment the payment is late, and on top of that the unpaid balance accrues interest at 1.5% per month. The penalty is a fixed amount, so a single day late triggers the same $200 as several weeks late, but the interest component grows the longer the balance sits. This combination means the cost of a forgotten payment escalates rather than staying frozen.

The math is worth internalizing because it changes how seriously a founder should treat the date. A $300 obligation that becomes $500 in penalty-inclusive terms has effectively jumped by two thirds, and each additional month of interest pushes it higher. For a non-resident managing the company remotely, the risk is amplified because there is no local accountant nudging them and the state reminder, if any, may go to an email that is not checked daily. This is precisely why formation services often send free reminders 30 to 60 days ahead of June 1, giving the owner a buffer to act.

Founders should also know that the penalty and interest attach to the entity, not the person, but an LLC carrying unpaid franchise tax cannot obtain a Certificate of Good Standing. That document is frequently requested by banks and counterparties during due diligence, so an overdue franchise tax can quietly block a banking application or a partnership at exactly the wrong moment. The downstream consequences often outweigh the dollar amount of the penalty itself.

What happens after two years of non-payment

If the franchise tax goes unpaid for two consecutive years, Delaware moves to cancel the entity at the state level. This is a meaningful event, not a warning. State-level cancellation strips the LLC of its standing and its ability to operate as a recognized entity. The company name may be released, the good-standing status disappears, and the legal protections that come with a properly maintained LLC can be undermined. For a founder relying on the entity to hold a bank account or sign contracts, cancellation is disruptive in ways that reach far beyond the unpaid $300.

Recovering from this state is possible but involves real cost and effort. Restoring a cancelled Delaware LLC requires filing a Certificate of Revival and paying all back-owed franchise taxes plus the accumulated penalties and interest for every missed year. The revival fee and the stacked back taxes can turn a neglected $300 obligation into a four-figure cleanup. The longer the lapse, the larger the eventual bill, because interest does not pause while the entity sits cancelled.

There is a difference between this involuntary, non-payment cancellation and a voluntary Certificate of Cancellation that a founder files to deliberately wind down a company. Voluntary cancellation is a clean exit that ends future franchise tax once obligations are settled. Involuntary cancellation for non-payment is a forced and messy outcome that leaves a trail of debt. A founder who genuinely wants to close the company should file the voluntary Certificate rather than simply stop paying and let the state cancel it.

How franchise tax differs between LLCs and corporations

A frequent source of confusion is that the same phrase, franchise tax, behaves completely differently for a Delaware corporation than for a Delaware LLC. The flat $300 figure applies only to LLCs. A Delaware corporation faces a variable franchise tax calculated under one of two methods, the Authorized Shares method with a minimum near $175, or the Assumed Par Value method with a minimum around $400 and a ceiling that can reach $200,000 for large companies. Corporations also must file an annual report by March 1, which LLCs do not.

For a non-resident founder choosing an entity type, this difference is a practical planning input. An LLC keeps the annual state cost flat and the paperwork minimal, with no annual report and a single fixed payment. A corporation introduces a calculation that can surprise founders who authorize a large number of shares without realizing the Authorized Shares method ties the tax to share count. Many early-stage founders who incorporate as a C corporation receive an alarming franchise tax estimate and only later learn they can recalculate using the Assumed Par Value method to lower it.

None of this changes the LLC reality, which is the focus for most readers here. If the entity is a Delaware LLC, the franchise tax is $300, full stop, with no share-based calculation and no annual report. Understanding the corporate rules mainly helps a founder avoid mistakenly applying corporate franchise tax math to an LLC, or panicking when they read about a $200,000 ceiling that simply does not apply to their company.

Where franchise tax fits in the formation sequence

The franchise tax is the recurring tail end of a formation process that starts with filing the Certificate of Formation for $110 and engaging a registered agent. Formation creates the entity, the registered agent keeps an in-state address for official mail, and the franchise tax keeps the entity active year after year. A founder moving through the standard sequence files formation first, obtains an EIN, opens banking, and only later encounters the first franchise tax deadline. Seeing the tax as the maintenance phase rather than the setup phase helps order these steps correctly.

Because the first franchise tax payment does not arrive until the June after formation, it rarely competes with the early cash outlays for filing and a formation package such as the $297 one-time service. This spacing is convenient. A founder can complete formation, banking, and EIN work in the first months without the franchise tax pressing on the budget, then handle the flat $300 as a separate, predictable event the following year. The risk is forgetting it precisely because it is decoupled from the initial flurry of activity.

It also connects to good standing in a direct way. The franchise tax being current is one of the conditions for the state to issue a Certificate of Good Standing. Since banks and counterparties may request that certificate during onboarding or due diligence, keeping the franchise tax paid is quietly load-bearing for the banking and partnership steps that come later. A lapse here can ripple into a frozen account application even when the founder has done everything else correctly.

The franchise tax versus federal tax obligations

One of the most important things for a non-resident to internalize is that paying the Delaware franchise tax is not the same as satisfying federal tax obligations. The $300 goes to the state of Delaware and concerns the entity's existence. Federal obligations run separately through the Internal Revenue Service. A foreign-owned single-member LLC, treated as a disregarded entity, generally must file Form 5472 attached to a pro forma Form 1120 each year to report transactions between the LLC and its foreign owner. That federal filing carries a penalty of $25,000 for failure to file, which dwarfs the franchise tax penalty.

These two obligations are easy to conflate because both are annual and both attach to the same company. A founder who diligently pays the $300 in June can mistakenly believe they have handled their tax responsibilities for the year, when the federal Form 5472 obligation remains entirely separate and far more consequential financially. Keeping a mental or written checklist that lists the Delaware franchise tax and the federal 5472 filing as two distinct line items prevents this dangerous blind spot.

The deadlines also differ. The franchise tax is fixed at June 1, while the federal information return follows the federal calendar tied to the entity's tax year, with the possibility of extensions. Treating them as one event invites a missed federal deadline. A founder who wants to stay clean on both fronts should track the June 1 state payment and the separate federal filing schedule independently, ideally with professional help on the federal side given the size of the 5472 penalty.

Related obligations that often travel together

The franchise tax rarely exists in isolation. It sits alongside the registered agent requirement, which is a separate annual cost typically in the range of $50 to $125 depending on the provider. A registered agent maintains a physical Delaware address to receive legal and state correspondence, and an LLC must keep one continuously. If the registered agent lapses, the state can flag the entity, and the combination of a missing agent and unpaid franchise tax accelerates the path to cancellation. These two annual items together form the baseline cost of keeping a Delaware LLC alive.

Good standing is the umbrella concept that ties these obligations together. An entity in good standing is current on franchise tax and has a registered agent in place. The Certificate of Good Standing, available from the state in a short form for around $50 or a long form for more, certifies this status to outside parties. Because the franchise tax is a precondition for that certificate, the tax is effectively a gatekeeper for the documentation a founder needs when dealing with banks and serious counterparties.

Foreign qualification is another related term worth noting. If a Delaware LLC also registers to do business in another US state, that second state may impose its own annual report and fees on top of Delaware's franchise tax. A founder who expands into California or Florida, for example, can find themselves managing Delaware's $300 plus the second state's separate compliance calendar. The Delaware franchise tax does not absorb or replace those out-of-state obligations, so multi-state founders should map every jurisdiction's calendar separately.

Edge cases that trip up non-resident founders

A common edge case is the dormant or pre-revenue company. Founders who form an LLC and then pause the project sometimes assume that a company with no activity owes nothing. The franchise tax does not work that way. As long as the LLC exists on the Delaware rolls, the $300 is due each June 1 regardless of whether the company ever opened a bank account or earned a dollar. A genuinely abandoned entity keeps accruing the tax until either it is properly cancelled or the state cancels it for two years of non-payment, which leaves a trail of penalties.

Another edge case involves timing near formation. Because the first payment lands the June after formation, a company formed in late May faces its first franchise tax just over a year later, while a company formed in early June of the same year effectively gets a longer runway before the first payment. Founders occasionally try to time formation to optimize this gap, but the savings are marginal and the flat fee makes such optimization low value. The more reliable habit is simply tracking the recurring June 1 date.

A subtler edge case concerns entities that change structure. If a founder converts an LLC to a corporation, the franchise tax math changes entirely from the flat $300 to the corporate calculation methods, and an annual report obligation appears. Conversions can therefore alter the annual state cost in ways that surprise founders who only budgeted for the LLC flat fee. Anyone considering a structural change should re-examine the franchise tax implications before filing the conversion.

Common misunderstandings worth correcting

The first misunderstanding is that the franchise tax scales with revenue. For an LLC it does not. Whether the company earned nothing or earned millions, the LLC franchise tax stays at $300. Founders who arrive from countries with revenue-based business taxes often assume Delaware works the same way and either overestimate the cost or underestimate it for a corporation. Anchoring on the flat $300 LLC figure clears this up for the most common reader profile.

The second misunderstanding is that paying the franchise tax handles all annual compliance. It does not. The franchise tax is a state existence fee and does nothing for the federal Form 5472 obligation, the registered agent requirement, or any out-of-state filings from foreign qualification. A founder who pays $300 in June and stops there may have left a $25,000 federal penalty exposure on the table. The franchise tax is one item on a longer maintenance list, not the whole list.

A third misunderstanding relates to recent federal beneficial ownership rules, which are separate from franchise tax entirely. Under the FinCEN Interim Final Rule of March 26, 2025, US-formed entities such as a Delaware LLC are exempt from the beneficial ownership information filing that previously generated anxiety among founders. This is a federal reporting matter handled at the FinCEN level and has no connection to the Delaware franchise tax. Conflating the two leads founders to either over-worry about BOI for a US LLC or mistakenly think franchise tax payment satisfies a BOI requirement. The two systems are unrelated, and the franchise tax remains the simple flat $300 state obligation it has always been for Delaware LLCs.

Practical habits for staying current every year

The single most useful habit a non-resident founder can adopt is to set a recurring calendar reminder for mid-May every year, giving a two-week buffer before the June 1 deadline. Because the founder manages the company remotely and may not receive timely mail through the registered agent, a self-managed reminder is more reliable than waiting for an external nudge. Many formation services send free reminders 30 to 60 days ahead, and treating that reminder as a backup rather than the primary trigger keeps the payment from slipping.

Keeping the Delaware file number somewhere accessible is equally practical. The franchise tax payment at corp.delaware.gov requires that number, and a founder who has misplaced it will lose time searching at exactly the moment they want to pay quickly. Storing the file number, the formation date, and the registered agent details in one document means the annual payment is a five-minute task rather than a scramble. Saving each year's payment confirmation in the same place builds a clean record of good standing.

Finally, pairing the franchise tax task with the broader annual review is sensible. June is a natural moment to confirm the registered agent is still active, verify the EIN paperwork is on file, and check whether any federal filing such as Form 5472 is approaching. Treating the franchise tax deadline as the anchor for a short yearly compliance check turns a single payment into a useful prompt to keep the whole entity healthy. This information is general in nature and not legal or tax advice, and a founder with a complex situation should confirm specifics with a qualified professional.

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