In summary, it is crucial for Delaware corporations to be aware of the annual filing requirements, including completing the Annual Franchise Tax Report, paying the respective fees, and meeting the due dates. This ensures compliance with state regulations and avoids unnecessary penalties and interest charges. Depending on the size of the corporation, this method can be a more straightforward approach to calculating the Delaware franchise tax.
This can significantly increase the financial burden for businesses that delay their payments. The total tax will never be less than $175.00, or more than $200,000.00. For every the classification of investments additional 10,000 shares authorized after that, you pay another $85 in franchise tax, up to a maximum of $200,000. 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. In Delaware, the franchise tax for LLCs is a flat fee of $300, regardless of company size, income, or activity.
How can I pay my Delaware franchise tax online?
If you’re not working with an accounting firm, you’ll need to total up your asset base and enter that number. Then you need to hit the “recalculate” button and wait while the system generates a new balance. The new number will very likely be lower than the original number you saw. If your DE franchise tax seems too high, use our calculator to see if your CPA used the wrong calculation method, and read our what is a journal entry a beginner’s guide info on how the calculation method can dramatically increase the tax bill. In conclusion, the Delaware Division of Corporations and official state government resources provide a wealth of information and assistance for businesses to understand and meet their franchise tax obligations.
What are the consequences of failing to pay Delaware franchise tax on time?
The Division of Corporations is a part of the Delaware Department of State that handles franchise tax administration. Corporations not conducting business in Delaware still have to pay a franchise tax, which is collected annually by the Department of State. The minimum franchise tax is $175 for corporations using the Authorized Shares method and $400 for corporations using the Assumed Par Value Capital Method. The choice between these two methods ultimately depends on the nature and size of the specific corporation, as well as its financial structure and performance. This foundational document is filed with the state to legally form the corporation.
Using the Delaware Franchise Tax Calculator
For most VC backed startups, the par value will be listed in one or more of the following legal documents. (Make sure you work with experienced attorneys so they don’t mess up important items like par value!) Your lawyer may also have put your par value into your cap table software. Since 1981, Harvard Business Services, Inc. has helped form 424,007 Delaware corporations and LLCs for people all over the world.
Provide all relevant documentation such as proof of payment and the reason for the refund request. Refunds are processed on a case-by-case basis, and approvals are not guaranteed. Franchise Taxes and annual Reports are due no later than March 1st of each year. At any moment, executives or team members may own public or private stock in any of the third party companies we mention.
Additional Resources and Assistance
- The authorized share method is generally Delaware’s tax team’s default method of calculating the franchise tax, and it can result in a much higher tax bill vs. the assumed par value method.
- Considering the payable tax deadlines and abiding by the requirements ensures businesses stay in good standing with the Delaware tax authorities.
- This valuable service makes managing Delaware franchise tax requirements more accessible and clear for businesses of all sizes.
- While our focus at Kruze is on C-Corps, it’s worth noting that Delaware has different requirements for other business structures.
Franchise and corporate taxes are not the same thing, and how to read a ledger most DE C-Corps that we advise do not have to file for corporate taxes in the state. All Delaware C-Corps are required to file a federal income tax return on Form 1120, even if they have incurred losses. This filing is typically due on April 15th and can be extended until October 15th. In addition to these taxes, Delaware C-Corps may also have to deal with other taxes such as income tax, gross receipts tax, payroll tax, sales tax, SaaS tax, property tax, and foreign tax. It is important to consult with a tax CPA to ensure compliance with all tax requirements.
And the maximum franchise tax for all corporations using either method is $200,000. Corporations with 1,500 shares or less and NO par value will always have a maximum tax of $175. It is a requirement that all Delaware corporations file an annual report. Interestingly, corporations incorporated in Delaware but not conducting business within the state are not subject to the Corporate Income Tax1.
