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. The annual Registered Agent fee is paid to Harvard men and boys Business Services, Inc. for you to act as an agent of your business in the state of Delaware. Your Delaware franchise tax due date depends on the type of business you own. This article focuses on businesses that are operating solely in Delaware. If your business is operating in multiple states, your business may have «nexus» with those other states.
Corporations can pay their franchise tax online through the Delaware Division of Corporations’ secure portal or by mail. The payment amount is determined based on the chosen calculation method, either the Assumed Par Value Capital Method or the Authorized Shares Method. The entity’s file number, available through the Delaware.gov website or from your Delaware registered agent, is required when submitting your tax and report. This ensures accurate recording and tracking of your compliance status.
Who has to pay the franchise tax?
Keep in mind, this number could be different from the number of shares your company has actually issued. Your authorized share number is the maximum number of shares your corporation could sell based on your corporate bylaws or charter. If you’re trying to figure out if you owe Delaware franchise tax, Bench can help.
The letter, much like the stop sign at real account examples the end of my street, was abrupt and impossible to ignore. Suddenly, I was facing the daunting task of proving my firm’s compliance to a third-party auditor, with no assurance of what they might find. This article is for informational purposes only and should not be relied upon as tax or legal advice. Please consult professionals for advice tailored to your specific situation. The author and publisher assume no responsibility for any errors or omissions or for any actions taken based on the information presented.
The Benefits of Compliance with Delaware Franchise Tax Requirements
After missing the deadline, you’ll need to pay a $200 late fee with cumulative interest each month. If your company falls into the maximum stock option of 5001 or more shares, there are two possible methods to calculate the Delaware franchise tax. If you pay your Delaware franchise tax late, you’ll be charged a late fee. The late fee is $125.00 and a 1.5 percent monthly interest afterward. If you are a startup that has chosen Delaware as its state of incorporation, you are likely aware that you are subject to Delaware franchise tax.
What Happens if Delaware Franchise Tax Is Paid on Time?
A tax haven or shelter social security benefits is a method of reducing taxable income which results in a reduction of tax payment. The method is any that recovers more than $1 in tax for ever $1 spent within a four-year period. If you don’t file your Delaware franchise tax on time, you will be charged a late fee. When paying the annual report fee, corporations are sorted into two categories. Along with your business’s annual Delaware franchise tax, your business is required to submit a Delaware annual report.
We provide small businesses with a tax filing and bookkeeping solution. Our all-star team does your monthly bookkeeping for you and sends your financials to trusted tax professionals for a stress free filing experience. 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.
- If you own a business that operates in multiple states, you will greatly benefit from the knowledge of a tax professional.
- Unlike for- or non-profit corporations, limited liability companies, limited partnerships, and general partnerships formed in Delaware do not file an annual report.
- The Franchise Tax for a Delaware LLC or a Delaware LP is a flat annual rate of $300.
- The annual report fee is $50 and the tax would be somewhere between $200 and $200,000 per year, as illustrated below.
- Think of it as a membership fee to the elite club of Delaware-incorporated entities.
- Delaware LLCs do not have to complete the annual report, but still pay the $300 Delaware LLC Franchise Tax fee.
” It doesn’t poke its nose into how much you earn or what your business activities are. Think of it as a membership fee to the elite club of Delaware-incorporated entities. The franchise tax is $400 for each $1,000,000 of “assumed par value capital.” For calculation purposes, round up to the next million if the assumed par value capital is over $1,000,000. I am calculating the franchise tax using the formula in this case.
It’s important to note that any stock amendments with the state are included in tax calculation, as any changes are legally part of the certificate. 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.
If so, that document can be sent directly from the Delaware Secretary of State. This document certifies the date the company was formed, that the company is current, and that the company is in good standing. You will also be charged a 1.5 percent monthly interest on the amount due. If your business was formed or is located in another state but generates income in Delaware, you may need to pay Delaware taxes. If you own a business that operates in multiple states, you will greatly benefit from the knowledge of a tax professional.