fbpx

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
Meeting with tax businessmen and company presidents to discuss SMEs tax collection problems, teamwor
What Is Section 83(B) Election?

The Section 83(b) election is a crucial tax strategy for startup founders and employees with restricted stocks. It allows them to pay taxes on the fair market value of the stocks at the time of granting rather than at vesting, potentially reducing tax liability and maximizing long-term gains.

Read More »
Understanding the Form BE-13
Understanding the Form BE-13: What It Is and What Foreign Investors Need to Know

When establishing a U.S. company as a foreign investor, it is important to comply with filing requirements like the BE-13 form, which reports new foreign direct investments to the U.S. Bureau of Economic Analysis. Clemta offers comprehensive support to simplify the filing process, ensuring timely and accurate submissions to help avoid penalties and maintain compliance.

Read More »
How to Choose Wholesale Products to Sell on Amazon

Choosing the right wholesale products for Amazon is crucial to ensure profitability and minimize risks. This guide explores key strategies, from sourcing resale-friendly brands to analyzing wholesale price lists. Automating the process with tools like Seller Assistant can save time and enhance efficiency.

Read More »
Businesswoman presenting report at business training
Expanding Business Beyond Delaware

When expanding your Delaware-incorporated business into other states, it’s important to navigate the foreign qualification process to ensure legal compliance and enjoy benefits like expanded market reach and increased trust, with resources like Clemta.com assisting in the process.

Read More »
LLC-VS.-C-CORP
LLC vs. C-Corp: Which Business Structure is Best for Non-US Residents in 2025?

Starting a business in the U.S. as a non-US resident involves choosing the right business structure, typically an LLC or C-Corp. An LLC offers flexibility with pass-through taxation and simpler management, making it ideal for small businesses. A C-Corp is suited for larger companies seeking investment opportunities, as it enables capital raising through stock sales, though it faces double taxation.

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.