How to get your Delaware Corporation in Good Standing
There are three basic ways your Delaware corporation can fall out of good standing:
- Failure to pay your Delaware corporation franchise taxes. If your Delaware corporation owes franchise tax, it will be called “Void.”
To renew your Delaware corporation and get in good standing, you first pay the franchise taxes online, and then file a Delaware certificate for renewal and revival of charter (renewal and revival of charter for a voided corporation). This form is in your online account, and you can change your registered agent to us right on the form.
This filing will cost $169 to the state of Delaware Division of Corporations. You MUST pay your taxes before filing this with the state.
- Failure to maintain a registered agent. If you do not keep a Delaware registered agent, or your Delaware registered agent resigns, it will put your Delaware corporation into “Forfeited” status.
To revive your Delaware corporation and get back in good standing, you first hire a Delaware registered agent like us, and then you file a certificate for renewal and revival of charter (renewal for a forfeited Delaware corporation). This form is in your online account at all times.
The filing fee is $169 to the Delaware Division of Corporations. You will have to be current on your franchise taxes before the Division of Corporations will process your filing.
- If you dissolved your Delaware corporation it will show as “Cancelled”.
The Delaware Division of Corporations supports a lot of our state. As such, it’s more like a business operation than an arm of a government branch. It’s one big operation and as many of you feel, a little bit of a racket. Most states just dissolve your company after a few years. Technically, in Delaware, you never really get dissolved, unless you go through some SERIOUS hoops and fees yourself. The state will say that you are continuing to rack up debt in the form of Delaware franchise tax each and every year.
We hear horror stories each month of absurd amounts people owe in franchise tax because they have too many shares. We always say; it’s the biggest completely legal scam in America! We have clients that get a franchise tax bill for $150,000 a year plus! They just don’t pay it, and then they land a deal a few years later and they need to show they are in good standing with the state of Delaware to get approved. They then find out they owe hundreds upon hundreds of thousands of dollars. Absolutely crazy!
So, the state has done something very smart. They really don’t dissolve you! They just let a bill keep racking up and hope you pay it someday. They probably figure you’re a lost cause anyway, so why go through the effort of dissolving your Delaware corporation. So, let’s say you want to dissolve your corporation 5 years after not paying your franchise tax. You have to pay ALL the franchise tax, late fees, and interest, BEFORE the state will let you dissolve. If a corporation does not pay their tax and file their annual report for 2 years, the state will void the company. The taxes stop accruing when the company is declared void To revive the company you have to pay 2 years of back taxes and file 2 annual reports. LLCs go void after 3 years. The tax stops accruing when the LLC is declared void.
Now, to the best of our knowledge, we have never heard of the state actually going after some corporation for owed franchise tax. Funny thing about that is we have all these lobbyists drafting the laws to protect the shareholders, officers, and directors from the liability of the corporation. So in theory, the state shouldn’t be able to go after you personally. It also seems like it would be awful for the perception of Delaware being a business friendly state and could ruin the reputation the state has spent so much time and money building. So we always just recommend forming a new company down the road if you need it.
We can help you form another corporation in a different state if you’re too fed up with the Delaware Division of Corporations at this point.