Yes, Delaware LLCs pay taxes, and there is no way around the baseline: every LLC formed in the state owes a flat $300 franchise tax each year, whether it earns a dollar or not. On top of that, members pay federal income tax on their share of the profits, and LLCs that actually do business inside Delaware also owe state income tax and a gross receipts tax. What you owe depends on where you live, where your LLC operates, and how you elect to be taxed.
The $300 Annual Franchise Tax
This is the one bill you cannot avoid. Delaware charges every domestic LLC a flat $300 per year simply for the privilege of existing under its laws.1Justia Law. Delaware Code Title 6 Section 18-1107 – Taxation of Limited Liability Companies It is due on or before June 1.
Miss that date and the state adds a $200 late penalty plus 1.5 percent interest per month on the unpaid balance. A single year of neglect can nearly double the bill. Staying current also keeps your LLC in good standing with the Secretary of State, which banks often demand before opening a business account and which lenders and investors check during due diligence. Fall too far behind and Delaware can cancel your certificate of formation, dissolving the entity and stripping the liability shield.
Every Delaware LLC must also keep a registered agent with a physical office in the state to receive legal documents and forward tax notices.2Justia Law. Delaware Code Title 6 Section 18-104 – Registered Office; Registered Agent A mailbox or virtual office does not qualify. If you live in Delaware you can serve as your own agent; otherwise expect to pay a commercial service somewhere between $49 and $300 a year.
Federal Income Tax on the Members
The IRS does not tax a Delaware LLC as a separate entity by default. Profits and losses pass through to the members, who report them on their personal returns.3Internal Revenue Service. LLC Filing as a Corporation or Partnership
If you are the only member, the IRS treats the LLC as a disregarded entity. You report business income and expenses on Schedule C of your Form 1040, the same way a sole proprietor would.4Internal Revenue Service. Single Member Limited Liability Companies The profit gets taxed at your personal rate, which for 2026 runs from 10 percent on the first $12,400 of taxable income up to 37 percent on income above $640,600 for single filers.5Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
A multi-member LLC is treated as a partnership. The LLC files Form 1065 to report the numbers, but pays no tax itself. Each member gets a Schedule K-1 showing their share of the profits and reports that share on their own return.
Self-Employment Tax
Active members owe self-employment tax on their share of the profits on top of income tax. The combined rate is 15.3 percent: 12.4 percent for Social Security and 2.9 percent for Medicare.6Office of the Law Revision Counsel. 26 USC 1401 – Rate of Tax
The Social Security portion only hits the first $184,500 of net self-employment income in 2026.7Social Security Administration. 2026 Cost-of-Living Adjustment (COLA) Fact Sheet Medicare has no cap. Above $200,000 for single filers or $250,000 for joint filers, an additional 0.9 percent Medicare surtax applies to the amount over the threshold. You can deduct the employer-equivalent half (7.65 percent) when calculating adjusted gross income, which softens the blow.8Internal Revenue Service. Topic No. 554, Self-Employment Tax For most small LLC owners, self-employment tax is the single largest tax they pay.
When Delaware State Income Tax Applies
Delaware’s personal income tax runs from 2.2 percent to 6.6 percent on taxable income above $60,000.9State of Delaware Division of Revenue. Tax Rate Changes Whether it touches you depends on where you live and where the LLC earns its money.
If you live in Delaware, your share of the LLC’s profit is taxable on your Delaware return, same as your federal return. If you live outside Delaware and your LLC earns no income from activities inside the state, you generally owe Delaware nothing.10State of Delaware Division of Revenue. Limited Liability Company FAQs Forming an LLC in Delaware does not by itself create a state tax obligation. Your income tax filings follow your home state.
The picture changes if the LLC has property, employees, or actual operations in Delaware. Then non-resident members must file Form 200-02 NR and pay tax on the Delaware-sourced portion of their income.11Delaware.gov. Form 200-02 NR – Non-Resident Individual Income Tax Return General Instructions
Gross Receipts Tax and Business License
Delaware has no sales tax. It has a gross receipts tax instead, charged on total revenue rather than profit, with no deductions for expenses.12State of Delaware Division of Revenue. Doing Business in Delaware Rates depend on the business category, running from 0.0945 percent to 1.9914 percent, and up to 2.4218 percent for petroleum-related businesses.13State of Delaware Division of Revenue. Gross Receipts Tax FAQs Returns are due monthly or quarterly depending on activity.
This tax only applies if your LLC is physically doing business in Delaware, meaning an office in the state, employees there, or transactions occurring inside its borders. An LLC that is only registered in Delaware but operates entirely elsewhere does not owe gross receipts tax.
Any LLC actually operating in Delaware also needs a business license from the Division of Revenue before it starts.14State of Delaware Division of Revenue. Business Licenses FAQs The fee depends on business type; a general services license costs $75 per year.15State of Delaware Division of Revenue. Detailed List of Division of Revenue Licenses
Electing Corporate or S-Corp Treatment
You can change the default. Filing Form 8832 lets an LLC be taxed as a C-corporation, in which case the LLC files Form 1120 and pays corporate tax, and distributions to members are taxed again on their personal returns. That is the classic double taxation.
Many small owners prefer the S-corporation election, made on Form 2553 no later than two months and 15 days after the start of the tax year in which the election should take effect.16Internal Revenue Service. Instructions for Form 2553 The LLC stays pass-through, but you can split income between a reasonable salary (subject to employment taxes) and distributions (not subject to self-employment tax). For members with substantial profits, that split can meaningfully cut the self-employment bill.
Extra Rules for Foreign Owners
Non-U.S. residents who own a Delaware LLC face federal reporting most Americans never see. A single-member LLC wholly owned by a foreign person must file a pro forma Form 1120 with Form 5472 attached every year, even with no U.S. income. Missing that filing costs $25,000 per form.17Internal Revenue Service. Instructions for Form 5472 Form 5472 cannot be filed electronically for a foreign-owned U.S. LLC; it must go by fax or mail.
If a multi-member LLC has foreign partners and earns income connected to a U.S. trade or business, the LLC has to withhold on the foreign partners’ share. The rate is the highest individual rate (currently 37 percent) for non-corporate foreign partners, or the highest corporate rate (21 percent) for corporate foreign partners.18Office of the Law Revision Counsel. 26 USC 1446 – Withholding of Tax on Foreign Partners Share of Effectively Connected Income