Delaware Annual Franchise Tax

You did it. Your Delaware LLC is officially up and running, ready to take on challenges, roll in the profits, and change the world.

There’s no doubt that this is an exciting time in your business journey. After starting your LLC, it’s easy to get carried away in all the excitement and expectations. After all, as a new business owner, you’ve got a lot on your plate.

But the state does too. They need to keep updated records on thousands of businesses so that they can effectively reach out with any important tax or legal communications down the road. How do they do it? With your cooperation, of course.

In Delaware, LLCs are not required to file annual reports. The only annual filing you’ll need to take care of is your franchise tax payment, which has the same due date and fee every year. Unsure how to go about it? Never even heard of it? No worries at all. That’s why we’re here. Keep reading for everything you need to know.

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What Is a Delaware Annual Franchise Tax? Why Is It Important?

Consider the Annual Franchise Tax a fee for the privilege of doing business in Delaware. It serves to keep your LLC in good standing. Whether you run a domestic or foreign LLC, you should plan on paying the Annual Franchise Tax.

Don’t be intimidated, but it’s not something you want to take lightly. Think about it like paying membership dues – it affords your company all the benefits and rights associated with doing business in Delaware. Fail to keep up your annual payments and, essentially, your LLC won’t have the right to operate in the state.

How Much Does the Delaware LLC Annual Franchise Tax Cost?

If you’re putting together a budget for all your LLC’s costs – like formation costs, name reservation fees, and initial operating expenses – it’s important to include annual filings like this one, just so that there are no surprises.

Costs vary from state to state. Some franchise taxes are $50 while others can be several hundred dollars. At $300, Delaware’s Annual Franchise Tax isn’t exactly cheap, so you’ll want to include it in your budget for each year. This does not take the place of your other state taxes. You will still need to pay any other applicable state business taxes by April 15 each year. If you need tax help, it might be prudent to consult a CPA or other tax professional.

Due Date and Frequency for the Annual Franchise Tax in Delaware

As the name suggests, you must file the Annual Franchise Tax once per year. It’s due by June 1 starting the calendar year after you form your LLC.

Let’s say you formed your business on April 18, 2021. In this case, your first Franchise Tax filing will be due by June 1, 2022, and by every June 1 after that.

What Happens if You Don’t File?

You might be thinking, “that sounds like a pain. How bad could it be if I just fly under the radar?” The short answer: don’t try it. Failing to file your Annual Franchise Tax can yield some serious consequences.

Miss the June 1 due date and your filing will automatically incur a $200 late fee, plus 1.5% interest for every month it’s overdue after that. Plus, it can cause your LLC to lose its good standing with the state and eventually suffer administrative dissolution. So, make sure you don’t forget to file!

Filing Options

Let’s get down to it and complete the filing. You must file the Annual Franchise Tax online, so apologies if you prefer paper forms. The good news is that your payment will be processed immediately – no waiting around for postal mail and hard copy handling.

To get started, head over to the Department of State’s online filing portal. Enter your seven-digit Business Entity File Number. Don’t know your number? You can perform a business name search to find it.

After entering your file number, you’ll be presented with the tax amount due. Click “Pay Taxes” and proceed to entering the necessary information. Once you’ve provided your personal and billing information, you’re good to go! You won’t have to worry about the Franchise Tax again until next year.

Does the State Send Reminders?

Reminders are always nice. They help you stay on top of your business requirements and ensure that you won’t fall out of good standing.

As a courtesy, the state will send a reminder each February to your designated registered agent. For this reason (among many others) it’s crucial that you keep the state updated if your agent resigns and/or you appoint a new one.

Even though the state has your back, it’s a good idea to double down with your own reminders. Put a note in your planner, mark it on your calendar, or set a reminder on your phone, whatever will ensure you don’t miss the June 1 filing deadline.

Conclusion

There you have it, everything you need to know about Delaware’s franchise tax requirements. Follow this guide to a T and your LLC will be prepared to operate smoothly and in good standing long into the future.


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