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No revenue doesn’t mean no taxes. In year one, many companies still have required federal returns, state franchise taxes, annual reports, or minimum fees — even if the business never opened a bank account or sent an invoice.
What you owe and what you must file depends on three things:
Your tax classification (how the IRS treats the entity)
Where you formed and where you operate (states can charge fees even with zero revenue)
Below is a practical breakdown of what’s typically required, what’s smart to do anyway, and where founders often get surprised.
Understanding payroll from day one.
Read our Founder’s Guide to Getting Started.
“No money” usually means “no revenue,” not “no activity”
Founders often say “we made no money,” but the IRS and states look at more than sales. Even in a quiet first year, you may still have:
Deductible expenses (formation costs, software, contractors, filing fees, etc.)
Losses you may be able to carry forward to future years
Even when a filing isn’t strictly required, filing can create a clean record of those items for the next year when you do start generating revenue.
Federal tax filing requirements (IRS)
Corporations (C-Corps and S-Corps)
If you formed a corporation, assume you have a federal return to file every year, whether the company is active or inactive, profitable or not.
C-Corps (Form 1120)
A domestic corporation must file Form 1120, U.S. Corporation Income Tax Return, even if it has no taxable income, unless it’s exempt under section 501.
Typical deadline: The 15th day of the fourth month after the end of the company’s fiscal year.
S-Corps (Form 1120-S)
S corporations also file an annual return, even with no income or if the business was inactive.
Typical deadline: March 15 (or the 15th day of the third month after the end of the fiscal year).
If you don’t file
The risk isn’t just “a late fee.” When an S corp doesn’t file, the IRS doesn’t assume you had zero income. It can make assumptions about taxes owed and send a bill accordingly. Late-filing penalties can also apply and may be calculated based on the number of shareholders.
LLCs (depend on how it’s taxed)
“LLC” is a legal structure. For federal taxes, what matters is the LLC’s tax classification.
Single-member LLCs (disregarded entities by default)
By default, a single-member LLC is treated as a disregarded entity, meaning you generally report business income and expenses on your personal return using Schedule C with Form 1040.
If your sole proprietorship business has no profit or loss during the full year, it’s not necessary to file a Schedule C.
That said, many founders still choose to file when there are setup costs or other legitimate expenses, so they can maintain a clean record.
Multi-member LLCs (partnership by default)
A multi-member LLC is generally treated as a partnership by default. Even with no income, it must file Form 1065 (U.S. Return of Partnership Income).
LLCs that elect corporate taxation
If your LLC elects to be taxed as a corporation, it’s expected to file a federal corporate return each year regardless of income.
State tax obligations (where founders often get caught)
Federal filings are only half the story. States can impose annual franchise taxes, minimum taxes, and required reports even if you didn’t sell anything. This is one of the most common “we didn’t know” issues for early-stage teams, including international founders.
Delaware corporations
If you have a Delaware corporation, you’re paying for the right to exist as a Delaware corporation. Delaware’s franchise tax applies even if you aren’t doing business in Delaware and even if you earned no income there.
Required payments
Minimum tax is $175 using the Authorized Shares method, and $400 minimum using the Assumed Par Value Capital Method.
A corporation must also pay a $50 filing fee plus the franchise tax.
Due date
The Delaware Annual Franchise Tax Report and payment are due no later than March 1 each year. No extensions are allowed.
Penalties
If the report and payment aren’t in by March 1, there’s a $200 penalty plus interest at 1.5% per month on the unpaid balance.
Delaware LLCs and partnerships
Delaware’s alternate entities have a simpler rule: they pay a flat annual tax.
All domestic and foreign LLCs, LPs, and GPs formed or registered in Delaware must pay an annual tax of $300.
Due on or before June 1 each year. Late or non-payment triggers a $200 penalty.
California LLCs
Every LLC doing business or organized in California must pay an annual tax of $800, due each year until the LLC is cancelled, even if you aren’t conducting business.
California corporations
California’s franchise tax is the larger of your California net income multiplied by 8.84 percent or the $800 minimum tax. The minimum tax is due in the first quarter of each accounting period and applies even if the company is inactive, operating at a loss, or filing for a short period.
Other states
Some states impose minimum franchise taxes or similar obligations even when income is zero. If you registered to do business in a state, check that state’s requirements so you don’t accumulate fees and penalties quietly in the background.
A practical way to think about “required,” “recommended,” and “risky”
Here’s the clean operator view: some items are non-negotiable filings or payments, and others are technically optional but still smart.
Situation | Status |
Filing Form 1120/1120-S for a C-Corp or S-Corp with no income | Required |
Paying Delaware franchise tax (corporation) | Required ($175–$400 minimum + $50 fee) |
Paying Delaware annual tax (LLC/LP) | Required ($300) |
Paying California minimum franchise tax | Required ($800) |
Filing Form 1065 for multi-member LLC with no income | Required |
Filing Schedule C for a single-member LLC with no income and no expenses | Not required, but recommended when there are expenses or you want a clean record |
Skipping filings because you had no revenue | Risky — penalties and IRS assumptions can apply |
What founders typically do next
Most teams don’t need a complicated plan here. They need a clean checklist and a calendar.
Confirm the entity and any elections.
Look at your formation documents and confirm whether you made IRS elections (Form 8832 for entity classification, Form 2553 for S-Corp).Get the state deadlines onto your calendar.
Delaware corporations: March 1. Delaware LLCs: June 1. California: Timing varies by entity type, but the $800 minimum is the headline.File even when you expect a “zero” return.
A consistent filing history reduces surprises later, especially if you’re carrying expenses forward or you need clean documentation for future years.Use a CPA who handles startups and cross-border realities.
International founders with U.S. entities can run into extra complexity around treaty positions, EIN applications, and state nexus. A CPA who sees these patterns routinely will keep things straightforward.
For all the payroll information you’ll need during your first year of business, download The Founder’s Getting Started Guide to Payroll. You’ll see exactly how to set up payroll from incorporation onward and avoid costly compliance mistakes.
Legal disclaimer: The information provided is for informational purposes only and should not be considered legal advice.
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