You must file your annual report if your business is a corporation and pay your franchise tax and filing fee by March 1. All LLCs, Limited Partnerships, and General Partnerships formed in Delaware are required to pay the annual franchise tax by June 1. The tax calculation method and the creating a table of values from a linear equation amount of the Delaware franchise tax differ based on the type of business entity.
Late Payment Penalties – Don’t Miss the Deadline!
This agreement outlines the terms and conditions under which shares are sold and purchased. The par value of the preferred shares being transacted is usually specified here, along with other particulars like the issue price, number of shares, and payment terms. If you incorporated in Delaware, yes, you need to file and pay understanding bond prices and yields the Delaware Franchise Tax.
Instead of doing hours of research on how to calculate Delaware franchise tax, use our tool to get answers in minutes. Choose your entity type below to begin your Delaware Franchise Tax calculation. These include a business-friendly court system, flexible incorporation rules, and the fact that businesses operating only outside of Delaware don’t have to pay state corporate income tax. This information is listed on the Delaware Certificate of Incorporation filed in Delaware.
If you’re trying to figure out if you owe Delaware franchise tax, Bench can help. Our the month-end close all-star team does your monthly bookkeeping for you and sends your financials to trusted tax professionals for a stress free filing experience. Failure to pay the franchise tax on time can result in penalties and interest. Corporations may be charged a penalty of $200 and accrue a 1.5% monthly interest for late payments. For LLCs, a late fee of $200 and a 1.5% monthly interest are also applicable.
Let’s also imagine it has authorized and issued 100,000 shares at a par value of $2.00 each, and 100,000 shares at par value of $10.00 each. Let’s also assume the number of shares issued and authorized is the same for simplicity’s sake. 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. Prolonged non-payment can lead to the loss of good standing status or even administrative dissolution of the business entity.
Method #1: Authorized Share Method (default method)
- The Delaware Franchise Tax is an annual fee imposed on corporations that are incorporated in the state of Delaware, regardless of whether they conduct business in the state or not.
- All Delaware C-Corps are required to file a federal income tax return on Form 1120, even if they have incurred losses.
- This emphasizes the importance of adhering to the given deadline to avoid accumulating penalties and additional financial burdens.
- Maintaining good standing in the state requires these entities to pay this tax, irrespective of whether they conduct business within Delaware or not.
- When using the ‘Assumed Par Value Method,» you must provide numbers for all issued shares (including treasury shares) AND total gross assets.
- Delaware franchise tax is an annual fee paid by businesses that are incorporated in the state, irrespective of whether they conduct business in Delaware or not.
Since they are exempt from the tax, it is crucial for them to comply with their annual reporting obligations. 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.
To calculate franchise tax for LLCs, refer to the state’s flat fee structure. Regardless of income or activity, all LLCs are required to pay a flat annual franchise tax of $300. The Annual Franchise Tax Report and payment for the prior year must be submitted by March 1st annually. Failure to file the report and pay the required franchise taxes by the due date will incur a penalty of $200.00, in addition to a 1.5% interest per month on both the tax and penalty.
Special Considerations for Specific Entities
Under this method, your franchise tax is based on how many shares your corporation has authorized. 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. Moreover, the Delaware Franchise Tax Calculator is designed to be user-friendly, allowing businesses to effortlessly determine their annual tax liabilities. However, it is essential to remember that the calculator is merely a tool, and the actual tax owed may vary slightly. The first is the use of virtual mailboxes, which Delaware does not accept because they require a physical address to know where your company is actually operating from. As a last resort, the CEO can list their personal address, but this is not ideal for everyone.
Using the Delaware Franchise Tax Calculator
Notification of Annual Report and Franchise Taxes due are sent to all Delaware Registered Agents in December of each year. Delaware has mandated electronic filing of domestic corporations Annual Reports. In addition to corporations, other business entities in Delaware, such as Limited Liability Companies (LLCs), Limited Partnerships (LPs), and General Partnerships, are impacted by the Franchise Tax.