Delaware Franchise Tax: Essential Guide for Business Owners

delaware franchise tax due date

The annual report fee is $50 and the tax would be somewhere between $200 and $200,000 per year, as illustrated below. The Delaware Franchise Tax for a corporation is based on your corporation type and the number of authorized shares your company has. The total cost of the corporation’s Delaware Franchise Tax consists of an annual report fee and the actual tax due.

Franchise Taxes vs. Corporate Income Tax

delaware franchise tax due date

These entities might include non-profit organizations, educational institutions, and certain religious organizations. Since they are exempt from the tax, it is crucial for them to comply with their annual reporting obligations. In order to utilize this filing method, you will need to provide the company’s total gross assets (as reported on Form 1120, Schedule L) and the total number of issued shares.

Authorized Shares Method

Interestingly, corporations incorporated in Delaware but not conducting business within the state are not subject to the Corporate Income Tax1. However, they are still required to pay the Franchise Tax, which is administered by the Delaware Division of Corporations2. All incorporated entities in Delaware must file an annual report and pay the corresponding franchise tax. Exempt domestic corporations are not subjected to the tax but still need to file an annual report with a filing fee of $253. Exempt domestic corporations in Delaware are not required to pay franchise tax, but they must still file an annual report.

Two Methods to Calculate Franchise Tax for a Maximum Stock Company

Since 1981, Harvard Business Services, Inc. has helped form 410,569 Delaware corporations and LLCs for people all over the world. The HBS Blog offers insight on Delaware corporations and LLCs as well as information about entrepreneurs, startups and general business topics. If you need assistance in obtaining a Certificate of Good Standing, we can help you receive your certificate in two business days or less.

How can I pay my Delaware franchise tax online?

  1. The objective of this tax is to provide a straightforward and affordable taxation process to encourage businesses to incorporate in Delaware.
  2. Moreover, the Delaware Franchise Tax Calculator is designed to be user-friendly, allowing businesses to effortlessly determine their annual tax liabilities.
  3. 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.

The due date of your Delaware Franchise Tax payment varies, depending on your company type. S Corporations, as well as large corporate filers, governed by the state of Delaware are subject to Franchise Tax, with different considerations for calculating the amount due. Filing the Annual Franchise Tax Report involves providing the corporation’s file number and other relevant information to the Delaware Secretary of State.

Special Considerations for Specific Entities

The Delaware Franchise Tax and the Registered Agent Fee are two separate, unrelated fees. The annual Franchise Tax is imposed by the State of Delaware and varies with the size of your business. The annual Registered Agent Fee is a fixed amount paid to Harvard Business Services, Inc. to act as an agent for your entity in the state. The State of Delaware allows you to pay the lower of the two Delaware Franchise Tax calculation methods.

However, it is essential to remember that the calculator is merely a tool, and the actual tax owed may vary slightly. This is not the same as your Delaware annual report and will not mention internal company information, such as director or officer details. Read on to find out how much you’ll pay, or visit our Delaware Franchise Tax calculator app for a quick answer. To get the specific calculations for your business, visit the Division of Corporations website and follow the instructions provided. In summary, special considerations must be given to Exempt Domestic Corporations, S Corporations, and Large Corporate Filers when dealing with Delaware Franchise Tax. Being aware and knowledgeable of the specific tax requirements for each type of entity will ensure accurate calculations and compliance with Delaware regulations.

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. In Delaware, corporations are subject to the Franchise Tax, which is administered by the Delaware Department of State. It is important to note that corporations incorporated in Delaware but not conducting business in the state are not subject to corporate income tax, as per 30 Del.C, Section 1902 (b) (6). The Franchise Tax is a requirement for maintaining good standing status in Delaware, regardless of whether a corporation conducts business within the state or not.

delaware franchise tax due date

After paying their Delaware Franchise Tax, many business owners require a Delaware Certificate of Good Standing. Prolonged non-payment can lead to the loss of good standing status or even administrative dissolution of the business entity. Franchise inventory types taxes contribute to Delaware’s state revenue and are essential for the maintenance of state services. Since 1981, Harvard Business Services, Inc. has helped form 410,568 Delaware corporations and LLCs for people all over the world.

Companies are also obligated to file an annual report, which goes hand-in-hand with the payment of franchise tax, to ensure the accuracy of the entity’s information on record. 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. This emphasizes the importance of adhering to the given deadline to avoid accumulating penalties and additional financial burdens. Regardless of income or activity, all LLCs are required to pay a flat annual franchise tax of $300. A corporation with 5,000 authorized shares or less is considered a minimum stock corporation.

Franchise Tax is the fee imposed by the State of Delaware for the right or privilege to own a Delaware company. The Delaware Franchise Tax has no bearing on income or company activity; it is simply required by the State of Delaware to maintain the good standing status of your company. Various tools and resources, including the Franchise Tax Calculator, have been designed to assist companies in estimating their franchise tax due accurately.

It’s vital for companies to be proactive in handling their franchise tax obligations to maintain a smooth and hassle-free tax filing experience. Failing to pay your franchise tax by March 1st for corporations or June 1st for LLCs will result in a late penalty and interest. After missing the deadline, you’ll need to pay a $200 late fee with cumulative interest each month. Paying a franchise tax is a legal requirement for business incorporated in the state of Delaware. Failure to pay the annual franchise tax can result, in penalties, fines, or even the loss of right to conduct lawful business. For corporations, there are two methods to calculate franchise tax – Authorized Shares method and Assumed Par Value Capital method.

If the tax is not paid on or before June 1, the state imposes a $200 late penalty, plus a monthly interest fee of 1.5%. In summary, Delaware’s Franchise Tax affects various business entities, including corporations, LLCs, LPs, and General Partnerships. Maintaining good standing in the state requires these entities to pay this tax, irrespective of whether they conduct business within Delaware or not. 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.

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