What the Delaware franchise tax is and who owes it
Delaware's franchise tax is an annual fee that corporations, limited liability companies (LLCs), and certain other business entities pay to the state to keep their legal status active. It is not an income tax — it is a fee for the right to do business as a registered entity in Delaware. Even if your business makes no money in a given year, you still owe the franchise tax if you remain incorporated or registered there.
The amount you owe depends on the structure of your business and, in some cases, how much revenue you report. A corporation might pay anywhere from $75 to $250,000 per year depending on which calculation method applies to your situation. LLCs have different rates. The state offers two main ways to calculate what you owe, and you pay whichever results in the lower amount.
If you incorporated in Delaware but do not actually operate there, you still owe the tax. If you incorporated elsewhere but have a Delaware subsidiary or registered agent, that subsidiary owes the tax. The obligation runs from the date you incorporate or register until you formally dissolve the entity.
Key Takeaways
- Delaware's franchise tax is an annual fee to maintain your business registration, not a tax on profits, and it applies whether or not your business earned money that year.
- The amount you owe is calculated using one of two methods — the authorized shares method or the gross revenue method — and you pay whichever is lower.
- Payment is due by March 1 each year, and the state charges a penalty if you miss the deadline.
- You can pay online through the Delaware Division of Corporations website, by mail, or through a registered agent, and the state provides a payment portal to check your balance and history.
- If you dissolve your business, you may owe a final franchise tax payment for the partial year, and you must file dissolution paperwork with the state.
How much you owe: the two calculation methods
Delaware gives you a choice between two ways to calculate your franchise tax, and you pay the lower amount. This is called the alternative calculation method.
The first method is based on authorized shares — the number of shares your corporation is authorized to issue under its certificate of incorporation. Rates range from $75 for corporations with up to 5,000 authorized shares to $250,000 for those with more than 10 million shares. If you are an LLC, the authorized shares method does not apply; you pay a flat $300 annual fee instead.
The second method is based on gross revenue — the total income your business received in the previous calendar year, regardless of expenses or profit. The rate starts at $75 for revenue under $25,000 and increases in brackets up to $250,000 for revenue over $5 million. You report your gross revenue on the franchise tax return form.
Most small businesses pay less under the gross revenue method. Most large corporations pay less under the authorized shares method. The state calculates both on your return and bills you for whichever is lower.
When the payment is due and what happens if you miss it
Franchise tax payments are due by March 1 each year. This deadline applies to all business entities, regardless of when you incorporated or when your fiscal year ends. The tax covers the calendar year that just ended (January 1 through December 31).
If you do not pay by March 1, the state charges a penalty of $100 plus interest. More importantly, your business status becomes forfeited — meaning you lose your legal right to do business in Delaware. You cannot sign contracts, sue, or defend yourself in court as a Delaware entity. If you want to restore your status, you must pay the overdue tax, the penalty, and any interest that has accumulated, then file a Certificate of Reinstatement.
Reinstatement can take several weeks. During that time, your business has no legal standing in Delaware. If you operate in other states and rely on your Delaware registration, forfeiture can create serious problems with those registrations as well.
How to pay your franchise tax
You can pay your Delaware franchise tax through three main routes: online, by mail, or through a registered agent.
The online payment portal is run by the Delaware Division of Corporations at the state's official website. You log in with your entity name and identification number, review your balance, and pay by credit card or electronic bank transfer. Online payment is the fastest method and gives you immediate confirmation. The state charges a small processing fee for credit card payments but not for bank transfers.
You can also mail a check to the Delaware Division of Corporations along with your franchise tax return form. The return form is available on the state website and must include your entity information, the calculation method you are using, and your gross revenue if you are using that method. Mail payments take longer to process and should be sent well before March 1 to account for postal delays.
If you use a registered agent — a person or company authorized to receive legal documents on your behalf in Delaware — that agent can often handle your franchise tax payment as part of their service. Not all agents offer this, so confirm with yours before relying on it. Using an agent does not change your deadline.
Tracking your payment status and finding your balance
The Delaware Division of Corporations maintains an online system where you can look up your entity's franchise tax history and current balance. You log in with your entity name and identification number to see whether your payment has been received, when it was processed, and whether any penalties or interest have been added.
If you paid online, your confirmation number appears immediately and the payment usually posts within one business day. If you mailed a check, allow at least two weeks for processing before checking your status online. If you do not see your payment reflected after that time, contact the Division of Corporations directly with your confirmation number or check number.
The state also sends a bill or notice to your registered agent or principal office address before the March 1 deadline. If you do not receive a notice, that does not mean you do not owe the tax — you are responsible for paying whether or not you receive a bill. Check your online account to confirm your balance rather than waiting for a notice.
What happens when you dissolve your business
When you dissolve a Delaware business entity, you must file a Certificate of Dissolution with the Division of Corporations. Dissolution does not happen automatically when you stop operating — you must file the paperwork to make it official and end your franchise tax obligation.
If you dissolve partway through the year, you still owe a prorated franchise tax for the months you were active. For example, if you dissolve on June 30, you owe half the annual tax. You calculate this on your final return and pay it along with your dissolution filing.
Once your dissolution is approved, you no longer owe annual franchise taxes. However, if you dissolve without paying any outstanding franchise tax or penalties, the state may pursue collection against you personally or against the business's assets. It is important to settle all tax obligations before filing your dissolution paperwork.
Frequently Asked Questions
Do I owe Delaware franchise tax if my business is inactive?
Yes. As long as your entity remains registered or incorporated in Delaware, you owe the annual franchise tax regardless of whether you conducted business that year. The only way to stop owing it is to formally dissolve your entity by filing a Certificate of Dissolution with the state.
What if I incorporated in Delaware but operate only in another state?
You still owe Delaware's franchise tax. Many businesses incorporate in Delaware for legal reasons even though they operate elsewhere. The franchise tax applies to all registered Delaware entities, regardless of where they actually do business.
Can I pay my franchise tax early?
Yes. You can pay at any time during the year. Paying early does not reduce the amount you owe, but it ensures you meet the March 1 deadline and avoid penalties. Some businesses pay in January to get it done early.
What if I miss the March 1 deadline by a few days?
The state charges a $100 penalty plus interest for any payment received after March 1, even if you are only a few days late. Your entity's status also becomes forfeited. You must pay the tax, penalty, and interest, then file for reinstatement to restore your legal standing.
How do I know if my entity has been forfeited?
You can check your entity's status on the Delaware Division of Corporations website by searching your business name or identification number. The status will show as "forfeited" if your franchise tax is overdue. You can also call the Division directly to confirm your current status and balance.