While we don’t normally file these for our clients, we are here to assist as needed. The ultimate consequence for both entity types is the forfeiture of the corporate charter or the cancellation of the LLC’s Certificate of Formation. Additionally, interest is applied to both the unpaid Franchise Tax and the $200 penalty at a rate of 1.5% per month. Limited Liability Companies, Limited Partnerships, and General Partnerships face a significantly less burdensome annual compliance obligation.
The Delaware Franchise Tax is a fee levied on most business entities incorporated in the state to maintain their good standing. Delaware has mandated electronic filing of domestic corporations Annual Reports. The Delaware Secretary of State’s Office and the Delaware Division of Corporations recently learned of a deceptive solicitation that has been mailed to numerous Delaware corporations from a company named Corporate Records Service.
- Delaware has mandated electronic filing of domestic corporations Annual Reports.
- Before calculating or paying the franchise tax, you must gather information for the mandatory Annual Report filed with the Delaware Division of Corporations.
- If payment is not paid by June 1, a penalty of $200 is applicable.
- If the tax is not paid on or before March 1, the state imposes a $200 late penalty, plus a monthly interest fee of 1.5%.
- All corporations using either method will have a maximum tax of $200,000.00, unless it has been identified as a Large Corporate Filer then their tax will be $250,000.00.
- Certain non-profit corporations are not required to pay the franchise tax but still must file an Annual Report and pay a smaller filing fee.
Delaware Annual Report FAQ
Foreign corporations are assessed a penalty of $125 if the Annual Report is not filed. All corporations using either method will have a maximum tax of $200,000.00, unless it has been identified as a Large Corporate Filer then their tax will be $250,000.00. The minimum tax is $175.00, for a 2021 update on tax and education credits corporations using the Authorized Shares method and a minimum tax of $400.00 for corporations using the Assumed Par Value Capital Method. For an Annual Report or Amended Annual Report for non-exempt domestic corporations the filing fee is $50.
No corporation shall consolidate with its assets of another entity for purposes of this section. Once filed, you may receive a confirmation receipt from the Delaware Division of Corporations. An officer would typically be the President, Vice President, Secretary or Treasurer of the company. The details of the officers and Directors are kept internally within the corporate record books. Perhaps the details of the company officer and/or directors need to be provided for banking or contract purposes. The Principal Place of Business is the physical location where the company is located.
Every delaware corporation should work with qualified professionals to ensure they file an annual report accurately and on time. Many CPA firms use offshore teams like Madras Accountancy to handle annual report filings and franchise tax calculations for their clients. Every domestic corporation must report and pay their annual franchise tax by this deadline to maintain good standing. This method calculates tax based on your corporation’s total gross assets and issued shares, providing a more accurate representation of the company’s actual economic value. The Annual Report filing fee for all other domestic corporations is $50.00 plus taxes due upon filing of the Annual Report. The annual Franchise Tax is due, regardless of whether or not the company has conducted any business, had any profit or loss, opened a bank account or filed a federal tax return.
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For corporations with 5,000 or fewer authorized shares, the tax is $175. The franchise tax calculation is not based on profits or business transactions; a corporation must pay it even if it conducts no business whatsoever. Corporations that neglect or fail to pay the franchise tax, or to file a complete franchise tax report, for more than one year will have their charters voided. Also, the Secretary of State will not issue a Certificate of Good Standing for a corporation that owes franchise taxes or a completed report.
Annual report filing services
These two components are closely linked and must be completed together through the delaware division of corporations’ online portal. Delaware allows businesses to calculate tax using both methods and choose the lower amount. As shown above, using the assumed par value method is often significantly cheaper for companies that have issued only a small portion of their authorized shares. This method can result in very high tax for startups that authorize a large number of shares for future fundraising but have not yet generated much capital or issued most of their stock. Corporations are the primary target of the franchise tax and must comply annually by March 1. The obligation begins the year the certificate of incorporation is filed and continues until the business is formally dissolved or converted.
- For corporations with 5,000 authorized shares or less, the minimum tax is $175.
- Learn corporate franchise tax methods, LLC flat fees, filing procedures, and penalty avoidance to maintain good standing.
- Under this method, your franchise tax is based solely on the number of shares your company is authorized to issue, regardless of whether those shares are issued or outstanding.
How much does my corporation have to pay?
The total cost of the corporation’s Delaware Franchise Tax consists of an annual report fee and the actual tax due. This type of company does not pay the standard annual Delaware Franchise Tax, but must still file and pay the annual report fee of $25 per year. A corporation that fails to file its report and pay taxes for more than one year will have its corporate charter declared void by the state. Dissolved corporations must pay all outstanding franchise taxes plus penalties and interest before reinstatement, along with additional reinstatement fees. Each delaware corporation must file an annual report regardless of activity level or revenue generated during the tax year. Any corporation incorporated in the state of delaware must pay an annual franchise tax.
The Delaware Franchise Tax and the Registered Agent Fee are two separate, unrelated fees. As your Registered Agent, we will send you tax excel income statement reminders both by mail and email well in advance of the due date. We make it easy to pay Delaware Franchise Tax online, and our Franchise Tax calculator can help you determine the amount you owe. If you’re not sure how to pay your Delaware Franchise Tax, our team can help.
Many Delaware corporations report the same information on their annual report each year. Like many states, Delaware requires that every corporation in the state file a Delaware annual report. Delaware LLCs do not have to complete the annual report, but still pay the $300 Delaware LLC Franchise Tax fee. If you decide to pay your Delaware Franchise Tax for a corporation with us over the phone, the annual report would need to be separately submitted to us by email, fax or mail.
Although Limited Partnerships, Limited Liability Companies and General Partnerships formed in the State of Delaware do not file an Annual Report, they are required to pay an annual tax of $300.00. Exempt domestic corporations do not pay a tax but must file an Annual Report. Any corporation that is incorporated in Delaware (regardless of where you conduct business) must file an Annual Franchise Tax Report and pay Franchise Tax for the privilege of incorporating in Delaware.
Information included in the Delaware Annual Report
The state of Delaware does not maintain an online database that allows anyone to view a copy of documents on file for a company. Using the Assumed Par Value Capital Method the State of Delaware allows you to recalculate your Franchise tax to pay the lesser amount. Failure to complete and submit the report by the due date will result in a late penalty. In the state of Delaware, a corporations Annual Report is due by March 1st. The state accepts amended reports for up to a year after the original filing.
Maintain Clear Internal Records
The Authorized Shares method is the default method, meaning that the state calculates the tax using that method and lists the amount due on its notice. It’s not an income tax; it’s a franchise tax. The corporation does not have to be doing business in Delaware or earn any income there. A straight-talking overview of five small business tax prep options in 2025, including Madras Accountancy, TurboTax, H&R Block, TaxSlayer, and Bench’s books-plus-tax model. Dissolved corporations cannot defend lawsuits, enter contracts, or maintain legal proceedings until reinstated. The Assumed Par Value Capital Method uses a complex formula considering assumed par value of issued shares, total gross assets, and total issued shares.
The annual tax covers the privilege of maintaining LLC status in Delaware and is significantly simpler than corporate franchise tax calculations. Most small corporations benefit from the Authorized Shares Method, while larger corporations often use the Assumed Par Value method for lower tax obligations. Foreign corporations (those incorporated elsewhere but registered in Delaware) and domestic Delaware corporations are subject to this tax. Understanding the difference between using the authorized shares method versus the assumed par value capital method can save significant money for many businesses. Delaware’s franchise tax system is a cornerstone of its corporate framework, and every business incorporated there must comply.
File Your Delaware Annual Report
The tax is levied at a rate of $400 for every $1,000,000 of Assumed Par Value Capital, or portion thereof. Corporations must provide the names and addresses of all directors and officers, along with the location of the principal place of business. The Delaware Corporate Annual Report is a two-part requirement encompassing the disclosure of corporate information and the assessment of the Franchise Tax. Maintaining the legal standing of these entities requires strict adherence to the state’s annual compliance obligations, which center on the Annual Report and the Franchise Tax. Franchise Taxes and annual Reports are due no later than March 1st of each year.
The Delaware annual report fee is $50 and the tax is $175 for a total of $225 due per year. 8 Delaware Code § 510 (2024) – Failure to pay tax or file a complete annual report for 1 year; charter void; extension of time. For domestic corporations, the deadline to file the Annual Report and pay the franchise tax is March 1st each year, and no extensions are granted. These solicitations urge corporations to file information and send payment in the amount of $125.00 by a certain date in order to complete corporate meeting minutes on behalf of the corporation.
Non-profit corporations are generally exempt from paying the franchise tax. Reinstatement requires paying all outstanding franchise taxes, penalties, interest, and reinstatement fees, which can be substantial depending on the dissolution period. Small businesses should review their authorized share structures, evaluate which tax method best fits their profile, and difference between gross & net maintain detailed financial records for accurate reporting. The LLC tax is relatively simple to pay an annual fee and does not require a report.
The tax provides Delaware with revenue for maintaining its business-friendly legal infrastructure and court system. Delaware franchise tax may seem like a routine obligation, but it can quickly become a liability if mishandled. These entities may need to work closely with tax professionals to ensure proper compliance with enhanced reporting requirements. This requirement is separate from franchise tax obligations but equally important for maintaining good standing.