Franchise Tax

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Franchise Tax

My father was a retired inventor, who was hopeful that he would invent a marketable product. He is now deceased. About 35 years ago, he registered a corporation in DE. The corporation never had any assets, liabilities or stock issuance. It has not conducted any business of any kind since its registration. With the passing of my father, there are no other officers in the corporation. DE is requiring fees to be paid for the annual franchise tax, a late tax penalty with applied interest of 1.5 per month, and fees to dissolve the corporation. My mother has severe dementia and lives on social security. Who is responsible for paying the company’s obligations?

Asked on March 18, 2019 under Business Law, Idaho

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

The corporation is responsible for paying these taxes. Shareholders are not, so even if your mother was made a shareholder of the company, she does not have to pay them. And certainly nonshareholders, even spouses or children, do not need to pay them. If the tax is not paid, the corporation can be barred from transacting business or be sued or suffer other penalty--but that's not an issue here, based on what you write. Similarly, neither you nor your mother need to pay fees to dissolve this corporation. Let DE go after the corporation: there is no reason that would concern you.


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