The phrase “franchise tax” confuses almost everyone, because it has nothing to do with franchises and isn’t really an income tax. It’s a fee for the privilege of existing as a registered entity in a state — owed whether or not the company made a dollar.
Income tax vs. franchise tax
- Income tax is charged on profit. No profit, generally no income tax.
- Franchise tax is charged for being registered. Zero revenue, still owed.
That difference is why a dormant Delaware LLC with no sales still owes its annual amount. The state isn’t taxing income — it’s charging rent on the registration.
Delaware, specifically
A Delaware LLC pays a flat $300 annual franchise tax, due June 1 — simple and predictable. The surprises come from two places:
- Founders who formed a corporation instead of an LLC meet a formula-based bill that can run into the thousands if the default “authorized shares” method is used instead of the “assumed par value” method.
- Founders who assumed “no revenue means nothing due” — and discover the delinquency only when penalties have stacked.
The takeaway
Budget for the franchise tax as a fixed cost of keeping the company alive, not as something tied to performance. Know whether you have an LLC or a corporation, because the math is completely different — and put the date on a calendar that doesn’t depend on your memory.
This resource is general information for non-U.S. owners of U.S. LLCs and was reviewed for accuracy in May 15, 2026. It is not legal or tax advice for your specific situation. Penalty figures are illustrative maximums published by the relevant agencies.