A franchise tax is an annual tax imposed by a state on entities organized or doing business in the state. It is unrelated to income; it is a flat fee for the privilege of maintaining the entity.
Why It Matters
Franchise taxes apply to each entity in the fund structure: the fund, GP, management company, and each SPV. Delaware charges $300 per year for each LP and LLC, due June 1. Failure to pay results in penalties, interest, and eventual administrative dissolution. For fund structures with multiple entities, franchise tax payments are a recurring compliance obligation that must be tracked across every entity.
Key Details
- Delaware charges $300 per year per LP and LLC, due June 1.
- Applies to every entity in the fund structure (fund, GP, management company, SPVs).
- Not based on income; it is a flat annual fee.
- Late payment triggers penalties, interest, and potential administrative dissolution.
- Other states have their own franchise tax schedules and deadlines.
Capital Company tracks franchise tax deadlines across all fund entities and coordinates timely payment as part of ongoing fund administration.
This content is for informational purposes only and does not constitute legal, tax, or compliance advice. Consult qualified counsel for guidance specific to your situation.