Does My Delaware LLC Have to File an Annual Report?

As a Phoenix Arizona attorney who advises startup companies, I have seen more than a few early-stage company clients who have chosen to form as a Delaware limited liability company (LLC) instead of the more popular Delaware corporation form popular among start ups.

The reasons some of these owners (more correctly, “members”) elect to do this exceed the scope of this post and will be covered in a later article.

The members of these Delaware LLCs sometimes ask me whether they must file an annual report with the Division of Corporations, similar to how Delaware corporations are required to do.

The good news?  Just like with an Arizona LLC, a Delaware LLC is not required to file an annual report.

The bad news?  Unlike here in Arizona, the State of Delaware does impose an annual tax on Delaware LLCs of (as of the date of this post) $300.

This is the case regardless of whether the Delaware LLC is operating in Delaware or, as with most of the clients I see, simply formed in Delaware but registered to transact business as a foreign LLC here in Arizona or in another jurisdiction.

As the website of the Division of Corporations puts it:

Although Limited Partnerships, Limited Liability Companies and General Partnerships formed in the State of Delaware do not file an Annual Report, they are required to pay an annual tax of $300.00. Taxes for these entities are due on or before June 1st of each year. Penalty for non-payment or late payment is $200.00. Interest accrues on the tax and penalty at the rate of 1.5% per month.

Founders who operate their businesses as Delaware LLCs but who are conducting or have relocated their operations to Arizona or another state should be mindful of (and preferably calendar) the June 1st deadline every year so as to avoid the late payment fee and interest charges, not to mention keep their company in good standing.

The annual franchise tax can be paid online by visiting the Division of Corporations website or by clicking here.

Ben Bhandhusavee is the founder of BhandLaw, PLLC, a Phoenix business and technology law firm advising early stage and more established businesses on complex corporate M&A, technology, and finance transactions, as well as e-commerce, creative intellectual property, Internet and digital media matters. Ben can be reached at (602) 222-5542 or by e-mail at bbhand@bhandlaw.com