As your Registered Agent, we will send you tax reminders both by mail and email, well in advance of the due date. We offer a tax filing service for a small fee in addition to your Franchise Tax amount. For a discounted rate you can submit your Delaware Franchise Tax payment via our online Franchise Tax form. The online fee will vary depending on when the online payment is submitted. You’ll incur a $200 penalty if you don’t file an annual report on or before March 1. You’ll also pay 1.5% per month applied against any unpaid tax and penalty.

• Delaware franchise tax is a tax charged by the state of Delaware for the right to own a Delaware company.
• It can be completed quickly with proper guidance and understanding of the process.
• For corporations with more than 5,000 authorized shares, the tax rate was $250 plus an additional fee of $50 for each additional 10,000 authorized shares.
• The minimum tax is waived on newly formed or qualified corporations filing an initial return for their first taxable year.
• 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.

Delaware Franchise Tax is based on a Corporation’s total Authorized Shares. In nutshell, Franchise Tax is a fixed fee for companies to pay to maintain their businesses in Delaware, in a sense the cost of having a business in Delaware. It is essentially a form of state tax imposed by the state of Delaware for the right to own a company in Delaware. Paying your Delaware franchise tax is an important requirement for all corporations incorporated in the state. By following the steps outlined in this article, you can ensure that you pay your tax on time and avoid any penalties or interest charges.

Whether your business is physically in Delaware or not, you don’t pay any state taxes. We will also explain who has to file and pay, how much they have to pay, and what happens if they don’t comply with the regulations. If you have moved your business out of state, or if your business has been dissolved, you may be eligible for a refund of the tax that you have already paid. However, if you are still doing business in Delaware but have simply changed your business structure, you will not be eligible for a refund. If you are unsure whether or not you are eligible for a refund, you should contact the Delaware Division of Revenue to discuss your specific situation. Becoming a Delaware C-Corp is simple, but there is a lot of legwork.

Step 3: Choose a Payment Method

Delaware franchise tax is an annual tax that businesses incorporated in the state of Delaware must pay. The tax is important to note that the Delaware franchise tax is not the same as the state’s corporate income tax. Similarly, businesses can reduce their total gross assets in the state of Delaware by selling assets or moving them out of the state. This will result in a lower tax liability under the assumed par value method. The Delaware Franchise Tax is a tax imposed on corporations for the privilege of doing business in the state.

The company owners’ personal assets become to creditors of the company. This is where keeping current with the Delaware Franchise Tax comes in. The Delaware franchise tax is collected every year by the Delaware Department of State. They mail your official business address an annual reminder to pay your franchise taxes. When filing a franchise tax in Delaware, all the must be submitted is the physical address of the business and the name of the registered agent. When you submit your Delaware franchise tax payment, you’ll also need to submit an annual report.

Everything you need to know about Delaware franchise tax

Fortunately, in the case of an LP and LLC there is no such trap because the annual franchise tax is a flat fee not formulated based on ownership interest calculations. They may decide to start with a minimum stock structure which is 1 to 5,000 shares of stock. With this stock structure, the Delaware Corporation will pay a $225 Delaware Franchise Tax each year which includes the annual report fee. This will allow for the lowest annual fees which is sometimes beneficial for bootstrapped start-up companies.

What Is Delaware Franchise Tax?

Don’t forget about your Delaware franchise tax and annual report filings! Delaware corporations or Delaware LLCs that are actively conducting business need to stay compliant with the Delaware Division of Corporations to keep a business in good standing. Filing the annual report and paying the franchise tax as soon as possible help you avoid frustration and delays with other time-sensitive filings. The Delaware Franchise Tax for a corporation is based on your corporation type and the number of authorized shares your company has.

Who has to pay the franchise tax?

After you’ve made your payment, it’s important to verify that it was received by the Delaware Division of Revenue. You can do this by visiting the Delaware Division of Corporations website and searching for your corporation’s name. If your payment was received, it will be reflected in your corporation’s record. Although not as common, the Investor Rights Agreement may also make reference to the par value of preferred shares. This document outlines the rights of the investors, including anti-dilution protections and information rights, among others.

If you’re trying to figure out if you owe Delaware franchise tax, Bench can help. We provide small businesses with a tax filing and bookkeeping solution. ‎wave invoicing on the app store Our all-star team does your monthly bookkeeping for you and sends your financials to trusted tax professionals for a stress free filing experience.

Authorized shares calculation (corporations with zero par value stock)

Delaware LLCs however are required to pay the Delaware Annual Franchise Tax no matter where their operations are located. This is true even if a Delaware LLC does not have any income in a given year. This article is for informational purposes only and should not be relied upon as tax or legal advice. Please consult professionals for advice tailored to your specific situation. The author and publisher assume no responsibility for any errors or omissions or for any actions taken based on the information presented.