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Using the Delaware Franchise Tax Calculator Harvard Business Services

delaware franchise tax calculator

The term “franchise” is not referring to, for instance, ownership of a McDonald’s or Subway franchise. Think of the franchise tax as the price paid for the right or privilege to have a Delaware Corporation. As long as your issued shares constitute a third to half of your authorized shares, this method will save you money. To reduce the taxes paid by a startup, use the Assumed Par Value method. The goal of the Delaware franchise tax is to make owning a business in Delaware simple. Since the tax payment process is simple, businesses are more likely to want to be incorporated in Delaware.

delaware franchise tax calculator

Additionally, the methodologies used to determine your tax liability vary across states. Even if they are chartered in another state, businesses may still be subject to the tax in several states. A franchise tax, despite its name, is not a tax on franchises and is distinct from the yearly federal and state income taxes that must be reported.

What is the Delaware annual franchise tax?

The Franchise Tax for a Delaware LLC or a Delaware LP is a flat annual rate of $300. This method is a bit more complicated, because it involves calculating your business’s assumed par value—i.e. The actual value of your business as estimated by the State of Delaware. What about regular travel as part of your regular work activities? These “business miles” are tax deductible as long as you begin at your regular place of business.

  • The minimum tax for companies using the Authorized Shares Method is $175, and the maximum annual tax is $200,000.
  • Foreign Corporations, Nonprofits, Limited Liability Companies, General Partnerships, Limited Partnerships and Limited Liability Partnerships pay a flat-rate annual fee or tax.
  • When using the 'Assumed Par Value Method," you must provide numbers for all issued shares (including treasury shares) AND total gross assets.
  • The methods of calculating Delaware Franchise Tax are detailed below.
  • The franchise tax is due even if the business didn’t conduct any activity or lost money.
  • For every additional 10,000 shares authorized after that, you pay another $85 in franchise tax, up to a maximum of $200,000.

Note that a single additional authorized share will cause this startup to pay an extra $85. The minimum tax for companies using the Authorized Shares Method is $175, and the maximum annual tax is $200,000. We’ve seen startups get a huge tax bill when this calculation method is used; let’s do an example of a typical, venture backed startup.

When Is The Delaware Franchise Tax Due Date?

This foundational document is filed with the state to legally form the corporation. It often includes details about the classes of stock the corporation is authorized to issue, including the par value of each class. For VC-backed startups, it will specifically mention the par value of preferred shares. Any changes to these details typically require an amendment to the Certificate of Incorporation.

  • Delaware companies are required to file their annual franchise fees online.
  • Whether your business is physically in Delaware or not, you don't pay any state taxes.
  • If you pay your Delaware franchise tax late, you'll be charged a late fee.
  • For persons filing their corporation’s Annual Report without assistance, however, the Delaware Division of Corporations’ website accepts the electronic filings.
  • Track your performance across channels with an easy to use SMM software.

When using the 'Assumed Par Value Method," you must provide numbers for all issued shares (including treasury shares) AND total gross assets. Despite not submitting an annual report, Delaware-based limited partnerships, LLCs, and general partnerships must pay a llcs vs sole proprietorships vs. other business entities $300 tax each year. But what if you want to recruit investors in the future and additional authorized shares are necessary? If necessary, a Stock Amendment may be submitted to the state for permission to raise the total number of corporation-authorized shares.

How to calculate the Franchise Tax amount due for your company?

Yes, regardless of your Delaware company activity or not conducting business, you are still required to pay the Delaware Franchise Tax to remain in Good Standing. If your company is no longer active and you wish to close your business, be sure to follow the proper steps to Dissolve a Corporation, or Cancel an LLC. The methods of calculating Delaware Franchise Tax are detailed below. Read on to find out how much you’ll pay, or visit our Delaware Franchise Tax calculator app for a quick answer. The due date of your Delaware Franchise Tax payment varies, depending on your company type.

Delaware stock is often issued with a minimum or no par value, similar to most states. Your Delaware company has 10,000 authorized shares, $100,000 in approved no-par capital, and a $100,000 tax rate. The “Authorized Shares” approach of tax computation will provide cheaper taxes than the “Assumed Par Value Capital Method” if your firm has “no par value” shares. The Authorized Share Approach bases its determination of the tax owed on the total number of authorized shares. Whether or not such shares have been allocated, this is the case.

Who has to pay and file?

Basically, a company pays $400 per million dollars of par value, but the way par value gets calculated is a bit complex. By March 1 of each year, Delaware corporations must submit an annual report to the Division of Corporations and pay any applicable franchise taxes to the State. If the Delaware Franchise Tax calculation uses the assumed par value capital method, the gross assets and issued shares are also to be listed. If you decide to pay your Delaware Franchise Tax for a corporation with us over the phone, the annual report would need to be separately submitted to us by email, fax or mail. 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.

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