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.

1. Formation

First, an LLC is Formed. The state jurisdiction in which the LLC is Formed is called its “Primary” or “Domestic” jurisdiction.

2. Qualification

Next, the LLC is immediately Qualified to Do Business in all the jurisdictions in which it will be operating. The jurisdictions in which the LLC is Qualified are called its “Secondary” or “Foreign” jurisdictions.

3. Registered Agent

As a part of the acts of Formation and Qualification, the LLC appoints its Registered Agents, who physically reside within the borders of each of its jurisdictions. Registered Agents are appointed to receive important documents such as Services of Process when the LLC is a party in a legal action such as a lawsuit.

4. Annual Maintenance

According to the requirements of each jurisdiction, the LLC must typically file Annual or Biennial Reports, and remit fees to the Secretaries of State in each of its jurisdictions.

5. Cancellation & Withdrawal

Finally, if an LLC is no longer to be used, it is Cancelled in its Domestic jurisdiction and Withdrawn in all of its Foreign jurisdictions.