Consequences of not paying Delaware Franchise Tax

Consequences of not paying Delaware Franchise Tax

Failing to pay Delaware Franchise Tax can lead to severe consequences, including a "void" status that prevents obtaining a Certificate of Good Standing. Additionally, companies face financial penalties and potential administrative dissolution for prolonged non-payment.
Table of Contents

To maintain a Delaware Corporation, you are required to pay your Delaware Franchise Tax. The Franchise Tax is not calculated based on your company’s income. Delaware law requires companies incorporated in Delaware to pay an annual franchise tax to keep the company in “good standing”. Even companies with no business activity must pay a franchise tax to maintain “good standing” status.

What is a “Good Standing” Status?

A Delaware Certificate of Good Standing is a document issued by the Secretary of State that shows the ability of a corporation to do business. If you have an overdue franchise tax, The Secretary of State will not issue a Good Standing status for your company.

Consequences of an Unpaid Franchise Tax

What happens when you do not pay your franchise tax?

  1. It will always stay in the records of the Delaware Division of Corporations. Even if you pay all the past due Franchise Tax, a missed Franchise Tax payment will be on the company’s history. If a potential investor, lender, etc. investigate your company, this may be unappealing.
  2. Eventually, your company will be marked “void” by the Delaware Division of Corporations. “Void” status will prevent you from obtaining a Certificate of Good Standing which explained before.
  3. Up to date penalty for non-payment or late payment is $200. Your company also be penalized at 1.5% interest for every month it remains unpaid.

Delaware LLC Annual Franchise Tax

Delaware Limited Liability Companies (LLC) and Limited Partnerships (LP) pay annual Franchise Tax due June 1st of each year, regardless of income or business activity. You can visit https://corp.delaware.gov/paytaxes/  to find out about up to date LLC Franchise Tax.

If you don’t pay the Franchise Tax for your Delaware LLC or Delaware LP for three consecutive years, your company will be administratively canceled by the State of Delaware. If you do not file your Franchise Tax by June 1st, you will be charged a late fee of $200 and your company will be penalized at 1.5% interest for every month it remains unpaid.

Delaware Corporation Annual Report and Franchise Tax

Delaware Corporations pay Franchise Tax due March 1st of each year. The Franchise Tax for a corporation is based on your corporation type and the number of authorized shares your company has. You can visit https://corp.delaware.gov/paytaxes/  to find out about up to date Corporation Franchise Tax. There are two methods to calculate Franchise Tax for a maximum stock company: Authorized Shares Method and Assumed Par Value Capital Method. You can visit https://corp.delaware.gov/frtaxcalc/ to calculate Franchise Taxes for your Delaware Corporation.

Corporations are also required to file an annual report. Filing an annual report is for corporations only.

If you don’t pay the Franchise Tax for your Delaware Corporation for two consecutive years, your corporation will be administratively dissolved by the State of Delaware. If you do not file your Franchise Tax by June 1st, you will be charged a late fee of $200 and your company will be penalized at 1.5% interest for every month it remains unpaid.

Explore more
Young woman is shopping online via using her gadgets and credit card. Thinking about bank account
Opening a bank account in the US

Opening a bank account in the United States offers significant advantages, such as easier financial transactions and access to a wide array of financial products. However, the process can be complex for foreigners due to stringent US regulations, making professional assistance a valuable asset.

Read More »
7 Proven Amazon Product Research Tactics
7 Proven Amazon Product Research Tactics

Product research is the foundation of a successful Amazon business. In this article, we share 7 practical tactics to help you identify high-demand, low-competition products with strong profit potential. With the right strategies and tools like Seller Assistant, you can streamline your research process and make smarter decisions for your Amazon store.

Read More »
Top E-commerce Platforms
Top E-commerce Platforms for Non-Residents Launching an LLC in the USA in 2025

Choosing the right e-commerce platform is essential for non-resident entrepreneurs setting up an LLC in the United States. Shopify, Amazon, Etsy, BigCommerce, and WooCommerce each offer distinct advantages catering to different business needs. Shopify is user-friendly and supports global sales, while Amazon provides access to a vast customer base and credibility.

Read More »
Start-up brainstorming meeting in modern office. Start up company
Startup Guide: 7 Legal Mistakes to Avoid

Starting a new business venture can be an exhilarating journey, but overlooking legal considerations can lead to serious setbacks; this blog outlines seven common legal mistakes startups should avoid to ensure success.

Read More »
Limited Liability Company (LLC) acronym arranged with wooden blocks
Business Structures: LLC and C-Corp

When starting a new business as a non-resident in the US, choosing between an LLC and a C-Corp is crucial. This post explores the key features, advantages, and disadvantages of each entity type to help you make an informed decision.

Read More »
Need Help Before You Go?

Get answers to your questions with a quick meeting. Schedule a free consultation to discuss your needs and next steps.