Please be ready to substantiate the evidence of this inactivity period for future audits from the state as you will pay less franchise tax for the inactive period. If you are not sure, consult with your accountant. Company officers and directors are critical information both for the state and the federal tax authority, the IRS. These titles are part of the company’s governance and are usually defined in the by-laws of the Company and/or general assembly decisions and/or board decisions. The address written on your SS-4 form sent to IRS may not reflect your current address information.
If you have all the above information available, you can start your Delaware State Franchise Tax Annual Report filing. If you are not sure what these are and/or the governance, please consult with your company’s business debt reduction lawyer or accountant. Officers and directors are different titles/roles and maybe the same or different people. You can check your Company by-laws to see if there are any assigned officers of the Company.
This brings the total annual cost of maintaining a Delaware corporation to $225 for many corporations. As we march through the month of May, please keep in mind that Delaware LLCs, LPs and GPs are required to pay an annual tax of $300 by June 1st. Our Dover staff put together a list of frequently asked questions to help you get a better understanding of what action to keep your company in compliance and what happens when you don’t. 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.
Your Partner in Delaware: DelawareAgency.com
For an LLC and Limited Partnership, the annual franchise tax is $300 (as of 1st of June, 2014). See our handbook glossary for more information about authorized shares. You can calculate the Delaware franchise tax using one of two methods. See File the Report and Pay Taxes Yourself for instructions on how to pay the franchise tax yourself online. This is one reason it’s crucial that your registered agent has your current contact information at all times.
Most of us know that April is the month when we file personal income tax returns with the Internal Revenue Service. For business owners who come to the State of Delaware for low incorporation and annual fees (no Delaware Income Tax for companies that run outside Delaware), they reach another important compliance deadline. Franchise taxes on businesses formed under the laws of Delaware are due for Corporations on March 1, and for Limited Liability Companies and Partnerships on June 1. To be compliant, the owner of a Delaware LLC needs to pay the Delaware franchise tax in the coming weeks. Delaware charges an annual franchise tax on businesses incorporated or operating within the state.
- More shares push the corporation to a higher tax bracket.
- We also send a follow up letter and two e-mails.
- The two methods use different inputs and different calculations.
- Corporate franchise taxes are due annually for all domestic corporations on or before March 1st.
You can choose our Accounting Services and handle your annual payments with us. On the next page, review the information provided, and make sure everything is correct before you submit. Franchise Tax is the tax collected by the state of Delaware for the right to own a Delaware company.
Delaware, known as the “Corporate Capital of the World,” attracts numerous businesses with its business-friendly environment, flexible corporate governance, and favorable legal system. But did you know it has a franchise tax that is imposed on businesses incorporated in Delaware. This tax acts as a significant revenue stream for the state. Delaware law requires that Delaware corporations pay an annual fee to the state called franchise tax.
No, Your Startup Doesn’t Owe Thousands of Dollars in Delaware Franchise Tax
Companies must pay Delaware’s annual franchise tax as part of filing Delaware’s annual franchise tax report. Startups may complete this obligation themselves online or get help from their company’s accountant or registered agent. The annual franchise tax and report can be filed and paid simultaneously on the state website. There is a $50 fee to file your annual report.
The Delaware state site URL to file your annual report and pay the franchise tax is also listed below for easy access. To use this method, you must quantify all issued shares (including treasury shares) and total gross assets in the spaces provided in your Annual Franchise Tax Report. Filing an annual report and paying franchise tax is also required to maintain a company’s good standing in Delaware. Not filing and paying means your company cannot obtain a good standing certificate and Delaware will declare your company void. Corporate franchise taxes are due annually for all domestic corporations on or before March 1st.
- Those figures are used to calculate the assumed par value of the corporation’s stock and then its total assumed (not actual) par value capital.
- So, if you delivered a tax bill with the number of hundreds of thousands, please consider calculating your tax amount with both methods.
- If you are registered in multiple states, you probably will have different ID numbers from each state.
- Franchise taxes on businesses formed under the laws of Delaware are due for Corporations on March 1, and for Limited Liability Companies and Partnerships on June 1.
- If the par value in your charter is higher, that number will be used instead.
You will see a list of Company names matching your search criteria, choose your own Company and note the File ID number. Delaware requires that all reports be filed electronically. The first report is due in the calendar year following initial registration. Reports may be filed as early as January 1. Franchise Tax is merely the cost of having a business in Delaware. It is a necessary tax for the companies established in Delaware.
Failure to file the report and pay the required franchise taxes will result in a penalty of $200 plus 1.5% interest per month on tax and penalty. Any Company incorporated in the State of Delaware, regardless of ownership, must file every year on March 1st, or receive an automatic $200 penalty. Delaware assesses an annual franchise tax for the privilege of doing business in the state. This return or “Annual Report” must be filed by March 1st with the state of Delaware each year, regardless on income or activity, as long as the business is registered in the state.
How is the Delaware Franchise Tax calculated?
Corporations compute the tax using either the authorized shares method or the assumed par value capital method. All corporations utilizing either method will face a maximum tax of $200,000. However, if identified as a Large Corporate Filer, the maximum tax reaches $250,000. You can pay the Delaware franchise tax on the Delaware Division of Corporations website.
This tax can come as a surprise to business owners but fear not. We’ll cover everything you need to know about the franchise tax. There is a $200 penalty if you miss the deadline for filing, and 1.5 percent a month interest on the amount due.
Domestic Delaware Benefit Corporation Annual Report Requirements:
Below we outlined the 411 on Delaware franchise taxes for your business. Regardless of whether they are actively doing business, all corporations and LLCs have to file reports and pay franchise taxes. If you don’t plan to use your company at all in the future, we can help you to dissolve it with the State.
Stay Compliant with Managed Annual Report Service
There is more information below on this subject. The State of Delaware just uses the term “franchise tax” to refer to taxes for the privilege of being formed or incorporated in the state of Delaware. For corporate businesses, the deadline is the 1st of March every year. If the amount has not been paid until this day, there will be a delayed penalty of $125 and 1.5% interest for each month the payment was delayed.
What the Annual Report Should Include
A corporation with 5,000 shares or less is required to pay $50 reporting fee and $175 tax ($225 in total). Get an easy-to-follow explanation about what forms you’ll need, information about registration fees, filing deadlines, naming requirements, and more. Is your company doing business in Illinois?