Delaware LLC Franchise Tax: The June 1 Deadline That Catches Non-Resident Owners Off Guard

The $300 Tax Almost Every Delaware LLC Owner Forgets

Delaware is one of the most popular states for non-resident founders to form an LLC - but many of those founders do not realise their company carries a fixed annual cost that has nothing to do with profit. Every Delaware LLC owes a flat $300 annual franchise tax to the state, and the deadline is the same for everyone: June 1.

If you formed a Delaware LLC last year, your first $300 payment is due by June 1 this year. It does not matter whether your company made money, lost money, or never traded at all. The tax is owed simply for keeping the LLC on the Delaware register.

Who Has to Pay - and When

Under the Delaware Limited Liability Company Act, every domestic LLC and every foreign LLC registered to do business in Delaware must pay an annual tax of $300. The tax for the prior calendar year is "due and payable on the first day of June." There is no sliding scale and no proration: an LLC that was active for a single day of the year owes the same $300 as one that traded all twelve months.

Delaware's Division of Corporations is required to mail an annual tax statement to each LLC - in care of its registered agent - at least 60 days before June 1. In practice, that notice goes to your registered agent, not directly to you, which is one reason the deadline is so easy to miss when you manage the company from abroad.

It Is Not an "Annual Report" - and That Confuses People

Here is a point that trips up many founders. Delaware corporations must file an annual report and pay a franchise tax by March 1. Delaware LLCs are different: they do not file an annual report at all. They simply pay the $300 tax by June 1.

So if you have read that your Delaware company has a "March 1 annual report deadline," check what entity type you actually have. For an LLC there is no report to file and no March deadline - just the single June 1 payment.

What Happens If You Miss June 1

The cost of missing the deadline escalates quickly. The day after June 1, Delaware law adds a $200 late penalty to the $300 tax, and interest accrues at 1.5% per month on the unpaid tax and penalty until everything is paid. A missed $300 bill becomes $500 plus interest almost immediately.

The bigger consequence is status. An LLC that fails to pay the annual tax when due "ceases to be in good standing." While it is not in good standing, the Delaware Secretary of State will not issue a Certificate of Good Standing for the company and will not accept most other filings for it. That can quietly block real business: opening or keeping a bank account, registering the LLC to do business in another state, completing financing, or closing an investment or a sale.

A company that is not in good standing also cannot bring a lawsuit in a Delaware court until it has been restored. And once the tax has been in arrears for three months, Delaware's Attorney General can ask the Court of Chancery for an injunction stopping the company from transacting business anywhere until the tax, penalty and interest are paid.

One reassurance: Delaware law is explicit that members and managers are not made personally liable for the company's debts simply because the LLC failed to pay its annual tax or fell out of good standing. The liability shield does not collapse over a missed $300 payment - but the practical problems above are real.

The Three-Year Cliff: Cancellation

If the tax stays unpaid long enough, the consequence becomes far more serious. Delaware law states that an LLC's certificate of formation "shall be canceled if the annual tax... is not paid for a period of 3 years from the date it is due," effective on the third anniversary of that due date. A cancelled LLC has no legal existence to operate through.

It can be revived - by filing a certificate of revival, paying a $180 filing fee, and paying every year of back tax plus all penalties and interest. But that is a slow, expensive cleanup compared with a $300 payment made on time.

How to Pay - and How to Avoid the Scam Letters

You pay the LLC tax online through the Delaware Division of Corporations' official system at corp.delaware.gov, using the company's file number. Payment is by credit card or electronic check; the state requires ACH for any payment over $5,000, which will not apply to a standard $300 LLC tax. Many founders simply have their registered agent handle the payment each year - that is fine, but confirm it is actually being done.

Be careful with the post and email you receive. Delaware's Division of Corporations warns publicly that LLCs receive deceptive solicitations that look like official tax notices but are not. Treat any letter or email that does not come directly from the State of Delaware or your own registered agent with suspicion, and pay only through the official state website or your verified agent.

This Is Separate From Your Federal IRS Filings

Finally, do not confuse the Delaware $300 tax with your federal obligations. A foreign-owned single-member LLC generally still has to file Form 5472 with a pro forma Form 1120 with the IRS each year, and that is a completely separate deadline with a completely separate set of penalties. Paying Delaware does not satisfy the IRS, and filing with the IRS does not satisfy Delaware. A compliant non-resident LLC keeps both calendars.

Have Questions About Your Own Situation?

Deadlines like June 1 are easy to miss when you are running a US company from another country, and the cost of getting it wrong is far higher than the tax itself. If you would like to talk through what your Delaware LLC owes and when, you can speak with the MP Partner experts team - no pressure, no hard sell, just clear answers.

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