An annual report is a form that businesses must file every year to report on the state of their business and reflect any changes that have happened in the year previous.
Although the annual report is a time-honored tradition in most of the 50 states, in Delaware, it’s a bit different: LLCs, or limited liability corporations, are exempt from filing it.
This doesn’t mean that you don’t have to do anything if you own an LLC in Delaware. You are required to pay what’s known as a franchise tax rather than a filing fee. There are still a number of rules that surround this requirement, however.
In today’s post, we will take a look at what those rules are. We will also discuss how to file your franchise tax, additional reporting requirements, late penalties, and a few other FAQs.
The short answer is that there are no Delaware LLC annual report requirements.
It’s important to state, however, that this does not apply to all businesses in the state of Delaware. Other types of companies and corporations must still file annual reports, in which they include information such as their business name, ownership details, and financials. Those financials are used to calculate the tax they will owe.
The financials are connected to (though not necessarily the cause of) whether or not an annual report is required. In the case of LLCs, which only have to pay a flat rate tax of $300, there’s nothing to calculate or report on.
Thus, there’s no need to worry about an annual report at all. Similarly, there’s no need to worry about the filing fee.
However, you must still get the details of your annual franchise tax right. If you fail to submit your tax, fail to submit it on time, or submit it incorrectly, you could face serious fines and penalties.
Many LLC owners look up how to file their Delaware LLC annual report, only to be confused by the answers they get: Yes, you must file something, but no, it’s not a report.
A bit of rephrasing clears things up, however. If by “Delaware LLC annual report,” we mean “annual LLC franchise tax,” then you quickly discover that there is a requirement and it’s pretty easy to meet.
Without further ado, here’s how to file it every year.
Before you navigate to the online portal to pay your annual franchise tax, it pays (har har) to determine if you even need to pay the tax.
How do you know if you’re required? According to the state of Delaware, you must pay taxes if your business was active between January 1 and December 31 at any time of the current tax year.
This means side hustles that take long enough breaks to be completely inactive for an entire tax year can skip their annual franchise tax without risking noncompliance.
If you’re not sure whether or not you conducted business in the tax year, talk to your accountant, bank, or a representative from the Delaware Division of Corporations page. The link will take you to options for live support, phone contacts, and in-person locations.
Do note that you can only get help at in-person locations by making an appointment in advance. For quick questions, there’s no need to go in.
There are two basic ways to file your franchise tax: online or by using a compliance service to help you get the job done.
By the way, Delaware does not offer instructions on filing annual franchise tax by mail. If you really wish to do so, you can contact them and ask about the best way to send in a check.
The state makes it easy to file online. To do so:
If you prefer not to mess with online portals and compliance yourself, you can always use a professional service.
Tailor Brands, for example, is happy to help you with annual compliance. We’ll make sure you’re following all the necessary state requirements and file your tax for you, so that you can worry about the things that are more important to your business.
No matter how you choose to file, it’s important you pay the right amount.
Typically, this is easy, because the flat rate for LLCs is $300 annually. The Division of Corporations page does not specify between domestic and foreign LLCs, so you may assume that the amount is $300 for both.
The only reason you might owe more than $300 is if you aren’t actually an LLC—as corporations pay taxes calculated on a different scale—or if you forgot to pay your franchise tax on time. In that case, you may receive a notice telling you that you owe more.
Since you only need to pay one lump sum per year, the timing is pretty simple: There’s one due date as well, and it is June 1.
Thus, your annual report fee—or rather, the tax that is in lieu of an annual report fee—is due on or before this date every year. As long as you follow the steps above to submit your online payment, or work with an LLC services company such as Tailor Brands to help you do it, you’ll be fine.
However, there are penalties for being late.
Should you fail to file your annual report taxes on time, there are additions to your standard filing fee, and they can really add up.
The fine for paying your franchise tax after the due date is $200. That means that if you submit your $300 at any time after June 1, you will instantly accrue an additional $200, payable to the state.
Delaware charges interest for missed payments. Not only do you pay the flat rate $200 late fee, you will also pay 1.5% interest on both the tax and penalty.
How does this work?
Let’s say you’ve missed the deadline, and now owe $500. After one month, you will owe $500 plus 1.5% of $500, or $7.50, for a total of $507.50. After two months, you will owe that amount plus 1.5% of that amount, for a total of $515.11.
Although the amounts are small at first, they can add up quickly. It’s better not to avoid life lessons in compound interest and pay at your first available opportunity.
After failure to pay your franchise tax for 3 years, Delaware will administratively cancel your LLC. That means you can no longer legally operate in the state.
In order to avoid this, make sure to pay the full amount of what you owe, including the late fees and penalties along with the principal sum, within those 3 years. Otherwise, you will have to start a new business.
Although there is no official Delaware LLC annual report, there is an annual franchise tax in lieu of the filing fee. If you want your business to remain in good standing, make sure you don’t miss the deadline.
If you need help filing your franchise tax on time, you can always reach out to Taylor Brands for assistance. We’re here to help!
Most states do require an annual report. However, as an LLC in Delaware, you do not have to file an annual report. All you have to do is pay a flat franchise tax in the amount of $300.
In addition to LLCs, limited partnerships and general partnerships are also exempt.
The annual franchise tax is due on or before June 1.
Yes, you will have to pay a $200 late fee and penalties of 1.5% interest each month.
This portion of our website is for informational or educational purposes only. Tailor Brands is not a law firm, and the information on this website does not constitute legal advice. All statements, opinions, recommendations, and conclusions are solely the expression of the author and provided on an as-is basis. Accordingly, Tailor Brands is not responsible for the information and/or its accuracy or completeness. It also does not indicate any affiliation between Tailor Brands and any other brands, services or logos on this page.
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