A Delaware LLC that does no business inside Delaware pays no Delaware state income tax, because the LLC passes its profit through to the owners' returns. What every Delaware LLC does owe is a flat $300 annual franchise tax due June 1, regardless of income. Federal tax still applies as usual.
By Alif Al Razi, Tax & Compliance Lead, Anonymousllc.co
Updated July 2026
A Delaware LLC is a pass-through entity by default, so the LLC itself pays no federal income tax. Profit and loss flow through to the owners, who report their share on their personal returns. A single-member LLC is treated as a disregarded entity, and a multi-member LLC files a partnership return (Form 1065) that issues each member a K-1.
Anonymity has no effect on how tax is calculated. The IRS knows exactly who owns the LLC through its EIN records and your returns. State-record privacy hides your name from the public database, not from the tax authorities. You owe the same tax you would owe under your own name.
The Delaware franchise tax on an LLC is a flat $300 per year, and it is the one non-negotiable state cost of a Delaware LLC. It is a fixed fee for the privilege of existing as a Delaware entity, not a tax on your profit, so a company that earned nothing still owes the full $300. Read the mechanics on the dedicated Delaware franchise tax page.
The word "franchise" is misleading. It has nothing to do with franchising a business. Delaware simply uses that label for its annual entity fee. Unlike a Delaware corporation, whose franchise tax scales with shares or assets, an LLC pays the same flat $300 no matter how large it grows.
No, not if the LLC does no business inside Delaware. Delaware taxes only income earned from activity within the state, so a Delaware LLC that operates entirely elsewhere or purely holds assets pays zero Delaware income tax. This is a core reason founders form holding companies in Delaware.
The catch is that income is taxable where you actually operate. If you run the business from California or Texas, that state can tax the income and may require you to register as a foreign LLC there. Delaware removes a layer of state income tax on the entity, but it does not erase tax in your home operating state.
The owner owes federal income tax on their share of the profit, plus self-employment tax on active earnings. A US owner reports single-member LLC income on Schedule C or as rental or investment income, and pays 15.3% self-employment tax on net earnings from an active trade or business. An LLC can elect S-corporation treatment to reduce that self-employment burden once profit is high enough to justify payroll.
A non-resident owner is taxed only on US-source, effectively-connected income and files Form 1040-NR when required. A foreign-owned single-member LLC also files the informational Form 5472 each year, and the penalty for skipping it is $25,000, so this filing is not optional.
No, the Delaware franchise tax is identical for residents and non-residents: a flat $300 due June 1. Delaware does not care where the owner lives, and a foreign owner of a Delaware LLC that does no business in-state owes no Delaware income tax either. Setup detail is on the non-resident formation page.
What differs for non-residents is the federal layer. Form 5472 and Form 1040-NR obligations attach to foreign ownership, and withholding can apply to certain US-source payments. A US tax professional should confirm your specific federal filings, because the entity-level Delaware picture is simple but the federal picture depends on your income type.
Delaware is the only one of the three privacy states that charges an annual flat franchise tax, which is its main ongoing cost disadvantage. Wyoming charges no income tax and only a small annual report fee based on in-state assets, and Nevada charges no income tax but bundles a $200 annual business license and $150 annual list into its fees.
All three states levy no state income tax on out-of-state activity, so the difference is in fixed annual costs, not income tax. If ongoing cost is your priority, Wyoming wins. If you want Delaware's courts and investor reputation, the $300 franchise tax is the price of admission. Compare the full picture on the Delaware vs Nevada page.
Delaware charges no state sales tax, one of only five US states with none. A Delaware LLC selling into other states, though, can owe sales tax there once it crosses a state's economic nexus threshold.
The absence of Delaware sales tax does not exempt a business from collecting sales tax elsewhere. Since the 2018 Wayfair decision, a state can require an out-of-state seller to collect its sales tax once sales into that state pass a threshold, commonly $100,000 or 200 transactions a year. A Delaware LLC selling nationwide tracks nexus state by state.
Delaware does levy a gross receipts tax on business conducted within Delaware, but an LLC that operates entirely outside the state does not touch it. For a holding company or a business run from elsewhere, Delaware's zero sales tax is a clean advantage with no in-state gross receipts exposure.
The Delaware LLC franchise tax of $300 is due June 1 every year, and missing it adds a $200 penalty plus 1.5% monthly interest on the unpaid balance. The LLC loses good standing until it pays in full.
The deadline is fixed at June 1 regardless of when the LLC was formed, so a company formed in November still owes the full $300 the following June 1. There is no proration for a partial first year. Anonymousllc.co tracks the date and files on request so the penalty never lands.
Losing good standing has real consequences beyond the penalty. Delaware will not issue a certificate of good standing to a delinquent LLC, and banks, lenders, and buyers request that certificate before they act. Paying on time keeps the entity clean and transaction-ready.
A US owner of an active Delaware LLC pays 15.3% self-employment tax on net earnings, covering Social Security and Medicare. Electing S-corporation treatment can reduce that burden once profit is high enough to justify running payroll.
Under an S-corp election, the owner takes a reasonable salary subject to payroll tax and draws the remaining profit as distributions that escape self-employment tax. The savings start once profit comfortably exceeds a reasonable salary, so the election suits an established, profitable business rather than an early-stage one. The election changes federal tax handling, not the $300 Delaware franchise tax.
A non-resident owner with no US-source effectively connected income does not pay US self-employment tax, because that tax attaches to US trade-or-business earnings. The self-employment question is mainly a US-owner concern; a foreign owner's analysis turns on Form 5472 and effectively connected income instead.
A Delaware LLC's federal filings depend on its structure: a single-member LLC reports on the owner's return, a multi-member LLC files Form 1065 with K-1s, and a foreign-owned single-member LLC adds Form 5472. Every Delaware LLC also pays the $300 state franchise tax by June 1.
A CPA should confirm the exact set for your structure and income, because the federal side turns on residency and how the income is earned.
Delaware $407 total ($297 + $110 state). Franchise tax reminders and filings handled for you.
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