Dissolving Delaware C-corp | franchise tax still owed?

My startup failed in early 2023. We incorporated in Delaware as a C-corp in 2021 because that is what our accelerator told us to do. We never raised beyond a small pre-seed and ran out of money. The company has been completely dormant since March 2023 — no revenue, no employees, no activity.

But I keep getting franchise tax bills from Delaware. They sent one for 2023, one for 2024, and I just got the 2025 one. Each one is $400 plus penalties and interest. Do I actually owe these? I thought if the company was dead the taxes would stop. How do I make this go away?

Unfortunately yes, you owe those taxes. Delaware franchise tax accrues every year that the entity exists on the state’s records, regardless of whether the company is active. Simply stopping operations does not dissolve the corporation. You need to formally file a Certificate of Dissolution with the Delaware Secretary of State.

Here is the bad news: to dissolve in good standing, you need to pay all outstanding franchise taxes, penalties, and interest first. If you owe for 2023, 2024, and 2025, that could be $1,200 or more in base taxes plus whatever penalties have accrued. Delaware charges 1.5% per month in interest on late franchise tax.

The process itself involves: (1) board resolution authorizing dissolution, (2) shareholder approval if required by your bylaws, (3) filing the Certificate of Dissolution with the Delaware Division of Corporations, and (4) paying all outstanding taxes and fees. The filing fee for dissolution is $204.

If you want a detailed walkthrough, there is a good guide at /2023/12/14/how-to-dissolve-your-delaware-corporation-or-llc/ that covers the step-by-step process including handling outstanding tax obligations.

I went through this exact situation. My co-founder and I ignored the franchise tax for three years and by the time we dealt with it, we owed over $2,500 between taxes, penalties, and interest. It was painful.

One option if you cannot afford to dissolve: Delaware has a “voided” status. If you do not pay franchise tax for a couple of years, they will void the entity. However, the taxes technically still accrue and they can send the debt to collections. So voiding is not a clean solution.

This is really frustrating. So I need to spend $1,500+ to properly kill a company that has zero dollars in it. I am the sole remaining director because my co-founder left the country. Can I do the dissolution myself or do I need a lawyer?

You can technically do it yourself. As the sole remaining director, you can sign the board resolution and the Certificate of Dissolution. If you had no shareholders other than yourself and your co-founder, and your co-founder has abandoned the company, you likely have the authority to act unilaterally.

That said, I would at least consult with an attorney briefly to make sure you do not have outstanding liabilities, convertible notes, or other obligations that need to be addressed before dissolution. If your accelerator took a SAFE or convertible note, that needs to be dealt with. A quick one-hour consultation would cost less than fixing a botched dissolution.

Pro tip: call the Delaware Division of Corporations directly at (302) 739-3073. They are surprisingly helpful and can tell you exactly what you owe. Sometimes the online portal shows incorrect amounts. They can also walk you through the filing requirements.

Also, if your entity was incorporated using the “authorized shares” method for franchise tax calculation and you had a lot of authorized shares (common for startups), you might be paying way more than necessary. You can retroactively request the “assumed par value capital” method which often results in the minimum $400 tax instead of thousands. It is worth checking.

This is the part of the “just incorporate in Delaware” advice that accelerators never mention. They tell you to form a DE C-corp for investor friendliness but never mention that you will owe $400+ a year in franchise tax even if your startup makes zero dollars.

If any aspiring founders are reading this: unless you are actively raising VC money, think hard about whether you actually need a Delaware C-corp. An LLC in your home state might be perfectly fine and much cheaper to maintain (or dissolve).