Does a pre-revenue company still have to file taxes?

Yes. A US C-corporation files a federal income tax return every year, whether or not it earned a dollar. The Instructions for Form 1120: "all domestic corporations ... must file an income tax return whether or not they have taxable income," unless exempt under section 501. The obligation attaches to existing as a corporation, not to earning revenue. Several other clocks run independently. Some bite a company with zero revenue and zero employees; several do not apply to you at all.

The federal return: Form 1120, every year

A company that spent the year building product and booking no sales still files, reporting an operating loss. Losses are an asset, though not a dollar-for-dollar one: under IRC section 172, losses arising in tax years beginning after 2017 carry forward indefinitely, but the deduction in any future year is capped at 80% of taxable income computed before it.

Filing is due "by the 15th day of the 4th month after the end of its tax year," so April 15 for a December 31 year-end. Form 7004 buys an automatic extension, "generally 6 months," moving a calendar-year filer to October 15. An extension to file is not an extension to pay, though at zero taxable income there is generally nothing to pay.

What the late-filing penalty actually is, and what it is not

This is where much published advice, including an earlier version of this page, gets it wrong. It is commonly claimed the IRS penalizes a late Form 1120 even when no tax is owed. Read the instruction. The penalty is "5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25%," and the 60-day floor is "the smaller of the tax due or $525." Both compute off tax due. At zero tax due, both are zero.

So a late zero-tax Form 1120 usually generates no federal failure-to-file penalty. That is not an argument for filing late. It is an argument for knowing where your real exposure sits, because what does bite a pre-revenue company is elsewhere, and larger.

• The assessment window never opens. Under IRC section 6501 the IRS generally has three years from the date you file to assess tax. No return, no clock.
• The R&D payroll election is lost permanently; it cannot be made on an amended return.
• Delaware's penalty is flat, so zero revenue does not shrink it.
• A Form 5472 penalty is $25,000, likewise not tied to income.
• Lapsed filings surface in financing and acquisition diligence.

Delaware franchise tax and the March 1 annual report

If you incorporated in Delaware, this applies even to a dormant company with no revenue, employees or bank balance. Domestic annual reports and franchise taxes for the prior year are due "on or before March 1st." This is not an income tax, and losses do not reduce it. Late, Delaware assesses "a penalty of $200.00 plus 1.5% interest per month." The tax is computed two ways and you pay the lower, which is why a first notice often looks alarming: that is the default. Our guide on why Delaware franchise tax is so high covers recalculating it.

State tax: only where you have a presence

Separate from Delaware, and often conflated with it. Most states where you have a presence, meaning employees, an office, sometimes other contacts, require a corporate return, and many impose a minimum regardless of income. California is the common case: an $800 minimum franchise tax applying to corporations doing business there even if incorporated in Delaware, and even at a loss. Corporations formed or qualified on or after January 1, 2020 are exempt in their first taxable year only.

Who does not have this: a company with no employees, no office and no other in-state contacts generally has no obligation in that state. Nexus rules vary and a single remote hire can change the answer, so which states you have nexus in is one for your accountant.

Payroll and information returns: driven by activity, not revenue

If you have employees

Revenue is irrelevant here. If you pay wages subject to withholding or Social Security and Medicare taxes, you file Form 941 quarterly, due April 30, July 31, October 31 and January 31, plus Form 940 annually and W-2s. Founders on payroll count, and an officer who performs services is generally an employee. One trap: "after you file your first Form 941, you must file a return for each quarter, even if you have no taxes to report, unless you're a seasonal employer or are filing your final return." No employees, none of this applies.

If you pay contractors

This threshold changed recently and stale guidance is everywhere. A Form 1099-NEC is required for each person paid at least $2,000 for services in the course of your business. The familiar $600 figure is out of date for these payments. Due to recipient and IRS by January 31, and 10 or more information returns in aggregate must be e-filed.

If a foreign person owns 25% or more

Easy to miss, expensive to miss. A 25% foreign-owned US corporation may have to file Form 5472, attached to Form 1120 by that return's due date including extensions. The penalty is "$25,000 ... on any reporting corporation that fails to file Form 5472 when due," plus another $25,000 if the failure continues past 90 days after IRS notice. No filing is required absent reportable transactions of the listed types, but whether your foreign shareholder's funding is one is a question for your accountant.

What you probably no longer file

Beneficial ownership information reporting dominated founder checklists in 2024 and largely does not apply now. FinCEN's interim final rule exempts "all entities created in the United States ... and their beneficial owners" from reporting BOI, narrowing "reporting company" to entities formed under foreign law that registered to do business in a US state.

Two positions easier to lock in before revenue

The 83(b) election, and its 30-day wall

If founders hold restricted stock subject to vesting, an 83(b) election taxes the shares now, while they are worth very little, instead of at each vesting date. It must be filed no later than 30 days after the property is transferred; if day 30 falls on a weekend or holiday, it is timely if postmarked the next business day. The IRS now publishes Form 15620 for it, though use is voluntary. There is no general late relief. Whether an 83(b) suits a given founder is a question for your own advisor.

The R&D payroll offset, with its real conditions

A qualified small business can elect to apply up to $500,000 of research credit against payroll taxes instead of income tax, turning engineering spend into cash for a company owing no income tax. The conditions are strict: gross receipts under $5 million for the year and none in any tax year before the five-year period ending with that year; unavailable if elected for five or more preceding years; and it must be attached on Form 6765 to a timely filed original return including extensions, never an amended one. The payroll tax offset reduces the employer Social Security share first, up to $250,000, remainder against the employer Medicare share.

The catch that matters most: it offsets payroll tax, so with nobody on payroll there is no liability to offset and the election delivers nothing. Separately, IRC section 174A now allows a current deduction for domestic research expenditures paid or incurred in tax years beginning after December 31, 2024, with an option under 174A(c) to capitalize and amortize over not less than 60 months.

The obligations here are modest. Discovering them late is what costs money, and clean bookkeeping from incorporation is what makes each of them cheap instead of frantic.

Frequently asked questions