Consequences of not paying Delaware Franchise Tax
You must pay Franchise Tax to maintain “good standing” status for your company. If you don’t pay your Franchise Tax, it will always stay in the records of the Delaware Division of Corporations and you will pay a penalty for late payment which is $200. Also, your company will be penalized at 1.5% interest for every month it remains unpaid. Delaware Corporations are also required to file an annual report besides paying the Franchise Tax.
To maintain a Delaware Corporation, you are required to pay your Delaware Franchise Tax. 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 Delaware 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?
- 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.
- 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.
- 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.
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