Missed the Delaware Annual Report and Franchise Tax Deadline?

All information, content, and materials available on this site are for general informational purposes only. Readers are advised to consult with their attorney or accountant with any questions or concerns. Corporations must list all directors and at least one officer on their annual report, to comply with Delaware laws. Set a budget for taxes so you don’t scramble to raise funds at the last minute. The 1.5% monthly interest rate can add up substantially if you owe thousands of dollars in taxes.

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 Authorized Share Method is Delaware’s default method. This approach uses tax brackets based on share count to determine the tax payment. Corporations with 5,000 or fewer shares will pay the minimum tax. More shares push the corporation to a higher tax bracket. Delaware looks at authorized shares instead of outstanding shares.

Domestic Delaware Close Corporation Annual Report Requirements:

They are only required to pay a reporting fee of $25. For LLCs, the deadline is the 1st of June every year. The period is also the same for Limited Partnerships.

• You can choose one of our services to start your business in the US, and you can always contact us for further information or questions.
• UCS shall not be liable for errors contained herein or for any damages in connection with the use of the information contained herein.
• Corporations use their pool of authorized shares to issue outstanding shares.
• The 1.5% monthly interest rate can add up substantially if you owe thousands of dollars in taxes.

The annual Corporate Franchise tax notifications are sent to your Delaware registered agent annually. Your registered agent is responsible for forwarding this notice to you. Some registered agents forward them by mail, while others scan and email them to you. The State of Delaware no longer mails hard copy annual reports. Instead, Registered Agents forward a notification letter in December.

Fees and Penalties

They simply pay their tax and they in “good standing” for another year with the state of Delaware. Delaware corporations and Limited Liability Companies (LLCs) must pay annual franchise taxes to the state. Businesses incorporated in Delaware must also file an annual report. Incorporate.com offers an annual service to help you meet these requirements and keep your company in good standing.

A Delaware Corporation’s franchise tax is the lesser of the two amounts under the authorized shares and assumed par value capital method calculated using total gross assets, not income. There’s an added fee of $50 to file the annual report. Therefore, the minimum Delaware franchise tax and annual report payment total is $225 a year for Delaware domestic corporations. For each additional 10,000 shares, or part thereof, the corporation must pay an additional $85.[5] So, if a corporation has 10,005 authorized shares, it must pay an annual franchise tax of $335 ($250 plus $85).

Assumed Par Value Capital Method

If the corporation has 100,000 authorized shares, it must pay $1,015 ($250 plus $765 [$85 times 9]). If the corporation wants to really go big or go home and has authorized 1,000,000 shares, it must pay a whopping franchise tax of $8,665 ($250 plus $8,415 [$85 times 99]). The amount of tax due can vary based on the amount of shares issued and/or authorized by the corporation.

Although the franchise tax is not applicable on exempt domestic corporations, they must still file the annual report. All filings are due by March 1st each year. If your corporation fails to pay annual franchise taxes or submit your annual report on or before March 1st, a $200 penalty will be assessed plus 1.5% interest per month on the taxes and penalty due. Many businesses (and specifically eCommerce businesses) are registered in Delaware. The Franchise tax obligations for your Deleware business will depend on whether your business entity is formed as a limited liability company (i.e., LLC), partnership or a corporation.

What the Annual Report Should Include

8, § 242(a)(3) (certificate of incorporation may be amended to increase or decrease the corporation’s authorized capital stock). You will see the franchise tax payable value change, probably to a very low amount – depending on your Company type, number of issued shares, gross asset value, and inactive dates (if any). If your company was incorporated in a certain year but was inactive for a period of time during the year, you can report this in the “inactive period” section and pay less taxes.

If you don’t have a physical presence in the US and if you conduct your business in your local country, you may use your local country address. Gross assets may differ for accrual basis and cash basis balance sheets. If you have filed tax returns previously, you would know whether you are cash or accrual basis. If you don’t have a capable or a stock register (even a simple spreadsheet document for this), then please either create one or consult with your accountant or lawyer. If you can not file on or before March 1st deadline, you can file later but would have to pay some penalty and interest. Please ensure that you type your Company name to match the exact name as used in the incorporation documents.

The two methods use different inputs and different calculations. Depending on the size and equity status of your business, the resulting tax amounts can differ wildly between the two methods. The State of Delaware has cargo tracking and contactless payment a franchise tax calculator on their website to make it easy to estimate and compare. Many people hear the term “franchise tax” and assume it’s not applicable to them. After all, they didn’t buy into a fast food chain.

Unlocking Delaware’s Franchise Tax

If the amount has not been paid until this day, there will be a delayed penalty of $200 and 1.5% interest for each month the payment was delayed. While the Delaware franchise tax may come as a surprise to some, it should not deter businesses from considering incorporation in the state. Delaware offers privacy protection, ease of management, and a favorable business environment that promotes growth and success.

We also send a follow up letter and two e-mails. Annual fees from $100 to $175 per state plus filing fees. The Delaware Franchise Tax applies to all corporations in Delaware. Whether you have financial activity during the year or not, you must file a Delaware Franchise Tax return and pay any taxes owed. Non-profit organizations are exempted from Franchise Tax.

It is levied on various types of business entities, including corporations, LLCs, limited partnerships (LPs), and limited liability partnerships (LLPs). [1] There is a difference between authorized and issued shares of corporate stock. The corporation is not, however, required to actually issue all of the shares that it is authorized to issue in its certificate of incorporation. Rather, the corporation may issue shares, from time to time, in exchange for some benefit (consideration) to the corporation, until all of the authorized shares have been issued.

All businesses formed in Delaware, including tax-exempt businesses, need to file an annual franchise tax report by March 1st of each year, and pay a filing fee of $50. Tax-exempt businesses do not pay the Delaware franchise tax or penalties, but they still need to file and pay the annual report fee to remain in compliance. This method calculates the tax based on your corporation’s total gross assets and the ratio of issued shares to authorized shares. Your corporation will owe an estimated $400 for each $1,000,000 in gross assets. The minimum tax when using this method is $400, and the maximum tax is $200,000.