Delaware doesn't send reminders. Delaware strikes you off.

For every corporation registered in Delaware, the rule is the same: the annual report and the franchise tax for the previous year are due by March 1, and both must be filed online.

The minimum tax is $175, the maximum $200,000, and $250,000 for very large companies. On top of that comes the fee for the annual report itself.

If you don't file and don't pay, you owe a $200 late penalty plus interest. And the company loses its good standing.

No letter goes out beforehand, at least not to you. It goes to your Registered Agent, and whether it gets forwarded depends on whether you've paid them and whether they have your correct address.

Delaware has two methods for calculating the franchise tax, and the difference between them is why some founders get a nasty shock every February.

The first method counts authorized shares. If you authorized five million shares at formation because a template said so, this method gives you a five-figure bill.

The second method relates the company's assets to its issued shares. For small companies it almost always produces a far lower amount, often this method's minimum tax of $400.

You're allowed to choose the cheaper method. But the first bill the system shows you uses the first method. If you see that number and pay in a panic, you've voluntarily overpaid by several thousand dollars, and getting it back is hard work.

That's not a system error. It's a choice nobody tells you about.

It happens on day one and costs you every year. A great many formation templates provide for a large number of authorized shares, because that makes sense for a company planning to raise capital.

For a company owned by a single European shareholder that will never take on investors, it's the opposite of sensible. It drags along a structure it doesn't need, and pays for it.

If that sounds familiar, it can be fixed. Reducing the number of authorized shares is a charter amendment: you pay the fees once and save every year after that.

This is where the paths split, and many people mix them up. A Delaware LLC doesn't pay franchise tax under these methods and doesn't file an annual report.

It pays a flat annual fee. The Delaware Code is clear: every domestic limited liability company, and every foreign one registered to do business in the state, pays an annual tax of $400. Each registered series adds $100.

This amount is due on June 1 for the past calendar year, first on June 1, 2027 for tax year 2026. If it stays unpaid, interest of one and a half percent accrues for every month or part of a month. What a US LLC without an American place of business can do for you tax-wise is the core topic of our sister site zerotax.llc.

So remember two dates and match them correctly: March 1 for corporations, June 1 for LLCs and LPs. Mix them up and you pay twice, once for asking too early and once for paying too late.

The term sounds harmless, and it isn't. A company that is not in good standing still exists, but there's a whole list of things it can no longer do.

It can't get a Certificate of Good Standing. American banks ask for one when you open an account and often every year to keep it open, business partners ask for one on larger deals, and investors always do.

In some situations it can't enforce its rights in court. It can't register in other states. And it can't be dissolved until everything outstanding has been paid.

If you discover years later that your company has quietly lapsed, you pay taxes and penalties for every year, plus a reinstatement fee. Catching up is possible, it's just needlessly expensive.

The honest answer has two parts. For companies raising venture capital, planning an IPO or running complex shareholder structures, Delaware is objectively the best choice. It has its own court for corporate law, decades of case law and judges who do nothing else. Investors know this law, and they insist on it.

For a European trade business with a workshop in Florida, an online retailer with a warehouse in Texas or a consultant with clients in New York, Delaware is usually an unnecessary extra layer. If you operate in another state, you have to register there as a foreign company anyway, pay fees there too and have a Registered Agent there as well.

One company then becomes two registrations, two annual fees, two agents. That's not a scam, it's simply the result of a decision made for the wrong reason.

We've taken the question apart in Why Delaware is so attractive and Which state is best, including the cases where the answer is clearly Delaware.

Check online whether your company is in good standing. The state registry is public, it takes two minutes, and all you need is the name.

Check that your Registered Agent is paid up and has current details. Wrong addresses on file are the most common reason deadlines slip by unnoticed.

Calculate the franchise tax using both methods. The state's calculator offers both. Pick the cheaper one.

And if you're carrying a large number of authorized shares, check whether you need them. A one-time charter amendment pays for itself within a few years.

Since the question of running costs comes up in almost every first consultation, here's the honest breakdown for a small company with no staff.

The state. In Delaware, the minimum tax plus report fee for a corporation, or the flat $400 for an LLC. In Wyoming and Texas it's lower depending on your setup; in California, with a minimum levy of several hundred dollars, it's considerably higher.

The Registered Agent. Between $50 and $300 a year, depending on the provider. Registered in several states? You pay several times.

The tax returns. The biggest and most variable item. A simple return for a dormant company is manageable; one with cross-border issues, reporting on transactions with the foreign shareholder and sales tax in several states costs many times more.

All in, a properly run small US company costs in the low four figures a year. That's considerably more than the amounts advertised online.

There's a whole market of formation services offering an American company for a few hundred dollars. The formation itself is usually done correctly. What's missing is everything that comes after.

Three warning signs. First: anyone who recommends an LLC without asking about your residence, your business and your tax situation is selling a product, not advice. Second: anyone who recommends Delaware without asking where you'll actually operate has a template, not judgment. Third: anyone who doesn't raise the reporting obligations for foreign shareholders on their own won't handle them either.

The damage never happens at formation. It happens in year three, when someone discovers missing returns for which there is no statute of limitations.

Since the Delaware deadline is a good moment to ask the question of where to incorporate at all, here are the three states that most often make European founders' shortlists.

Wyoming is the cheapest. Low annual fees, no state income tax, a simple registry. Its reputation for anonymity is overrated in practice now that federal transparency requirements apply. For a pure holding company with no operating business, Wyoming is often the most sensible choice.

Texas is the state for operating businesses. No personal income tax, a business levy with a high exemption threshold, a deep labor market and an administration that moves fast. On the other hand: noticeable property taxes and sales tax obligations you have to take seriously.

Florida is the state for trade and for people who also want to live there. No income tax, manageable fees, good connections to Europe and Latin America. Property insurance is expensive because of the hurricane risk, which belongs in every calculation.

In all three cases the choice follows the same logic: your state of incorporation should be the state where you actually do business, unless you have a concrete reason for another. The details are in The states we recommend.

American companies are cheap to run and merciless about deadlines. That is not a contradiction but the same principle seen from two sides: the state stays out of your business as long as you meet your obligations, and it does not remind you of them either.

Coming from Europe, you have to get used to the fact that nobody calls ahead. Once you have, it feels like a relief.

If you would rather hand off your ongoing obligations than manage them yourself, talk to Mount Bonnell Advisors in Austin, Texas. What that covers is explained in Ongoing management of US companies and Compliance for your US corporation.

Update, October 22, 2026: The increase in the LLC tax to $400 was passed on May 21, 2026 and applies from tax year 2026. You will find all the details in Delaware has quietly raised its prices.

Consultation & implementation

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