Many LLC’s are Formed in Delaware (as we’ve noted before, there is good reason to do so).  But in Delaware, should you fail to File your Annual Report and to submit your Franchise Tax payment by the Annual Delaware due date of June 1st, your LLC will incur a late penalty and monthly interest with the state.  Different states exact different late fees with different terms, but in Delaware late entities suffer an initial late penalty of $100, with 1.5% in compounding interest.

Now, if having become subject to late penalties and interest in Delaware, you then decide to pay just your $250 in Franchise Tax payment online, as you would regularly, it turns out Delaware just won’t let you!  Once an LLC has incurred late penalties and interest in Delaware, all of the amount owed must be payed before the state will accept the Annual Report, and thereby declare the entity as being in Good Standing.  It’s all or nothing.

Now here’s the tip: 

Delaware does accept partial payment on an account if it is submitted to the Secretary of State by postal mail.  So, if for whatever reason you wanted just to pay the $250 amount, you can send mail in this payment rather than paying it online, and Delaware will accept it.

There’s good news and bad news concerning this peculiarity with Delaware.  

The bad news is that Delaware won’t, upon receiving payment for just the Franchise Tax, thereby declare your LLC in Good Standing.  As long as the entity owes money, it will stay in Delinquent status.  So, in one sense, making partial payment is fruitless.

The good news is that the 1.5% interest applies just to whatever is owed.  So, by paying off part of the entity, you decrease the amount you will end up owing in interest.  So, broadly construed, if you can’t pay everything due to Delaware immediately, it’s not wholly fruitless to mail in what you can.

Tags: Annual Filings, Annual Reports, Delaware, LLC

This entry was posted on Wednesday, July 1st, 2009 at 6:04 am and is filed under LLC Compliance, LLC Information. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.