FAQs About Delaware Corporation Annual Reports and Franchise Taxes

If you’re trying to figure out if you owe Delaware franchise tax, Bench can help. 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. We file both your state and federal business taxes for you. 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.

• However, if that's not possible, having an extra two weeks to file your Delaware return can help.
• Whether your business is physically in Delaware or not, you don't pay any state taxes.
• The Delaware Registered Agent fee is separate from the Franchise Tax fee.
• The best plan would be to make sure that you do not neglect your annual report filing in the first place.

Your authorized share number is the maximum number of shares your corporation could sell based on your corporate bylaws or charter. After two years of non-filing and non-payment of the Delaware would you please explain unearned income LLC annual fees, the corporation’s Certificate of Incorporation will be revoked. Delaware is one of several states in which your state income tax return can be filed after April 15.

When are franchise taxes due for my Delaware corporation?

If the corporation was formed in Delaware, it is a domestic Delaware corporation, no matter where you actually live. Let’s also imagine it has authorized and issued 100,000 shares at a par value of $2.00 each, and 100,000 shares at par value of $10.00 each. Let’s also assume the number of shares issued and authorized is the same for simplicity’s sake.

Some corporations may be eligible for exemptions or reductions in the franchise tax. For example, corporations that are registered as non-profits may be exempt from the tax, and corporations that are just starting out may be eligible for a reduced tax rate. Using the Assumed Par Value Method, the tax responsibility is calculated at the rate of $400 for each $1,000,000 of total gross assets. A corporation with 5,000 shares or less can pay the minimum tax of $175.

Determining Whether You Are Required to Pay Delaware Franchise Tax

Additionally, interest will be charged on any unpaid tax at a rate of 1.5% per month. Delaware is home to more than 1 million business entities, including more than 60 percent of Fortune 500 companies. This means that the state has a well-established legal and regulatory framework that corporations must adhere to.

The annual Registered Agent fee is paid to Harvard Business Services, Inc. for you to act as an agent of your business in the state of Delaware. 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. This means that you're likely to need to pay taxes in those states. Payment can be submitted with an electronic check or credit card.

Delaware Franchise Tax: Everything You Need to Know

That's why it's important to know about the exemptions and credits that can help reduce the tax burden. Limited Liability Companies (LLCs), Limited Liability Partnerships (LLPs), and Limited Partnerships (LPs) do not need to file annual reports, but these business entities must pay taxes. Should there be an unintended error in the submitted information, an amended annual report can be filed for $50.

If the franchise tax is not paid on time, the corporation may be subject to penalties and interest. The state of Delaware may also revoke the corporation's certificate of incorporation. The best plan would be to make sure that you do not neglect your annual report filing in the first place. Once you’ve done so, you can check that off your “to-do” list for another year and get back to the business of running your business.

Fill out Delaware Annual Report Information

The Division of Corporations pull in a TON of money off hammering people with late fees and interest. As your Delaware registered agent, we send you a ton of reminders to file this to hopefully save you some money. It is important to note that the Delaware Franchise Tax is separate from the federal and state income taxes that corporations are required to pay. Failure to comply with any of these tax requirements can have severe consequences, including legal and financial penalties.

You are allowed, however, to calculate the tax you owe based on either method. If you have any more questions about filing a Delaware annual report, here are some frequently asked questions. Corporations using the assumed par value method will pay a minimum of $400 and a maximum of $200,000.