You will also be charged a 1.5 percent monthly interest on the amount due. Your Delaware franchise tax due date depends on the type of business you own. This article focuses on businesses that are operating solely in Delaware. If your business is operating in multiple sales general and administrative vs cost of goods sold states, your business may have “nexus” with those other states. Foreign corporations, those that are formed outside of Delaware, cannot file online. Business that are formed out of state but are registered to do business in Delaware must pay a $125 registration fee.

• This document certifies the date the company was formed, that the company is current, and that the company is in good standing.
• Workhy offers end-to-end solutions that facilitate company set-up, management, and growth by enabling users to carry out all processes related to their business online, on a single platform.
• The tax is due on or before March 1st of each year and can be paid online, by mail, or in person.
• The Delaware Franchise Tax is calculated in one of two ways, depending on the type of business entity.

The Delaware Franchise Tax is a very important part of the state’s revenue, and it is crucial that you pay it on time and in full. If you have any questions about the tax or how to pay it, be sure to consult the official website or contact the Department of Finance. The Delaware Franchise Tax also applies to LLCs and partnerships, but it does not apply to sole proprietorships or non-profit organizations. For more information about the Delaware Franchise Tax, please visit the Delaware Department of Revenue website.

Delaware Franchise Tax Filing: A Step-by-Step Guide

The minimum franchise tax for corporations with up to 5,000 shares is $175, while the maximum tax for corporations with over 10,000,000 shares is $200,000. It’s important to note that the Delaware Franchise Tax is different from the state’s corporate income tax. The corporate income tax is based on the net income of the business, while the franchise tax is a fee that is charged regardless of the company’s profitability. Additionally, the franchise tax is due on an annual basis, while the corporate income tax is typically paid quarterly.

Your authorized share number is the maximum number of shares your corporation could sell based on your corporate bylaws or charter. Under this method, your franchise tax is based on how many shares your corporation has authorized. By not requiring more information, businesses that file their franchise tax in Delaware can maintain privacy. The names of the owners, LLC members and managers are not required to be made public.

Can Delaware Franchise Tax be Waived or Reduced?

The filing fee for all other domestic corporations is $50, plus any taxes that are due when the annual report is filed. All registered corporations are required to pay taxes and file their annual reports before the 1st of March. Delaware Corporations, Limited Liability Companies (LLCs), and Limited Partnerships (LPs) are required to pay the annual Delaware Franchise Tax. This retroactive franchise tax can create a “gotcha” for corporations ambitious in authorizing a large number of shares and not careful with how many shares it issues. Therefore, if incorporated in Delaware, the corporation should have 5,000 or fewer authorized shares to minimize this annual franchise tax. Do not fall into this potential corporate tax trap by authorizing millions of shares and issuing a small number of shares.

Can I get a refund for the Delaware Franchise Tax that I’ve already paid?

In addition to corporations, Delaware limited liability companies (LLCs), general partnerships, limited partnerships (LPs) and limited liability partnerships (LLPs) must also pay franchise taxes. Franchise taxes are generally due in arrears for the prior calendar year. The California franchise tax, for example, is equal to the larger of your California net income multiplied by the 8.84 percent tax rate or the $800 minimum tax.

What date should I use to value the Gross Assets?

This method is a bit more complicated, because it involves calculating your business’s assumed par value—i.e. The actual value of your business as estimated by the State of Delaware. Delaware lets you use whichever method amounts to the least tax owed. The corporate laws and cases decided in Delaware are often used by the Supreme Court to influence decisions.

Step 3: Choose a Payment Method

But what if you plan to bring aboard investors in the future and the need for more authorized shares is required? If the need arises, a Stock Amendment can be filed with the state for approval to increase the number of authorized shares of the Corporation. For corporations, the tax is calculated based on the number of authorized shares of stock the company has.

What happens if I don’t pay?

But what exactly is Delaware Franchise Tax Filing, and why is it so important? Inkle’s blog post will break down the process into simple steps anyone can follow. If you’re a business owner in Delaware, then you are most likely familiar with the annual franchise tax requirement. Delaware is a popular state for incorporation, and its business-friendly policies have made it an attractive destination for many corporations. However, with the many benefits of incorporation in Delaware, there are also some obligations that come with it, such as the franchise tax.