Discover the remarkable advantages of Delaware as a business destination. Our tax pros can assist C-Corps, S-Corps, and LLCs incorporated in states across the US. The franchise tax is paid online at the Division of Corporations website. Upon completion the entity’s status will move out of delinquency and a Good Standing can be issued. Go to the franchise tax filing website for the State of Delaware Division of Corporations. Your Delaware franchise tax is due every year on March 1st.
If you don’t know, consult with your bookkeeper, accountant or tax preparer. You can always reach out to us for professional help. Set a budget for taxes so you don’t scramble to raise funds at the last minute.
In sum, a small Delaware corporation that has no need to authorize more than 5,000 shares of capital stock should never do so, to avoid paying additional franchise tax every year for no good reason. Regardless of whether they are actively doing business, all corporations and LLCs have to file reports and pay franchise taxes. If you don’t plan to use your company at all in the future, we can help you to dissolve it with the State. Corporations compute the tax using either the authorized shares method or the assumed par value capital method.
Filing Delaware Annual Reports and Paying Franchise Taxes: Tips and Resources
Delaware offers privacy protection, ease of management, and a favorable business environment that promotes growth and success. Taxpayers owing $5,000.00 or more pay estimated taxes in quarterly installments with 40% due June 1st, 20% due by September 1st, 20% due by December 1, and the remainder due March 1st. The penalty for not filing a completed Annual Report on or before March 1st is $200.00 Interest at 1.5% per month is applied to any unpaid tax balance.
The Delaware state site URL to file your annual report and pay the franchise tax is also listed below for easy access. If your company was incorporated in a certain year but was inactive for a period of time during the year, you can report this in the “inactive period” section and pay less taxes. There is more information below on this subject. I don’t understand why I have to pay franchise taxes. Every Delaware-based corporation must pay the Delaware Franchise tax.
For business owners who come to the State of Delaware for low incorporation and annual fees (no Delaware Income Tax for companies that run outside Delaware), they reach another important compliance deadline. Franchise taxes on businesses formed under the laws of Delaware are due for Corporations on March 1, and for Limited Liability Companies and Partnerships on June 1. To be compliant, the owner of a Delaware LLC needs to pay the Delaware franchise tax in the coming weeks.
Please be ready to substantiate the evidence of this inactivity period for future audits from the state as you will pay less franchise tax for the inactive period. If you are not sure, consult with your accountant. The address written on your SS-4 form sent to IRS may not reflect your current address information. Please check your SS-4 form, and/or prior-year tax returns (if any) to ensure you have updated address information also with IRS. If not, you may need to file Form 8822-B to update your business mailing and principal addresses. If this is your first year, then you may want to decide how you will file your tax returns and complete your form accordingly.
Filing an annual report and paying franchise tax is also required to maintain a company’s good standing in Delaware. Not filing and paying means your company cannot obtain a good standing certificate and Delaware will declare your company void. Many Delaware corporation owners form companies and authorize huge numbers of shares (millions, in some cases).
Domestic Delaware Nonprofit Corporation Annual Report Requirements:
But did you know it has a franchise tax that is imposed on businesses incorporated in Delaware. This tax acts as a significant revenue stream for the state. The minimum tax for companies using the Authorized Shares Method is $175.
- Franchise Tax is the tax collected by the state of Delaware for the right to own a Delaware company.
- If you don’t know, consult with your bookkeeper, accountant or tax preparer.
- Please feel free to contact us to get help about this method.
- The total gross assets should be the “total assets” reported on US form 1120, schedule L (federal return) for the company’s fiscal year ending the calendar year of the report.
- Our tax pros can assist C-Corps, S-Corps, and LLCs incorporated in states across the US.
- Please bear in mind that authorized and issued shares are different concepts.
We also send a follow up letter and two e-mails. Annual fees from $100 to $175 per state plus filing fees. Late and missed payments result in a $200 penalty. Late tax payments and the penalty acre interest at the rate of 1.5% per month.
Delaware Franchise Tax Information
This return or “Annual Report” must be filed by March 1st with the state of Delaware each year, regardless on income or activity, as long as the business is registered in the state. Don’t forget about your Delaware franchise tax and annual report filings! Delaware corporations or Delaware LLCs that are actively conducting business need to stay compliant with the Delaware Division of Corporations to keep a business in good standing. Filing the annual report and paying the franchise tax as soon as possible help you avoid frustration and delays with other time-sensitive filings.
Delaware law requires companies incorporated in Delaware to pay an annual franchise tax to keep the company in “good standing”. Even companies with no business activity must pay a franchise tax to maintain “good standing” status. All limited liability companies (LLCs), limited partnerships (LPs), and general partnerships (GPs) registered in Delaware are required to pay an annual tax of $300 by June 1st. If the taxes are not paid, there is a penalty of $200 plus 1.5% interest per month on the tax and penalty. Delaware corporations and Limited Liability Companies (LLCs) must pay annual franchise taxes to the state. Businesses incorporated in Delaware must also file an annual report.
- Each year, Delaware Limited Liability Companies, Limited Partnerships, and General Partnerships pay a franchise tax of $300 by June 1st to remain in good standing with the Division of Corporations.
- If this is your first year, then you may want to decide how you will file your tax returns and complete your form accordingly.
- The annual report includes basic information, like your company address and your board members or officers.
- Your Delaware franchise tax is due every year on March 1st.
You must pay Franchise Tax to maintain “good standing” status for your company. If you don’t pay your Franchise Tax, it will always stay in the records of the Delaware Division of Corporations and you will pay a penalty for late payment which is $200. Also your company will be penalized at 1.5% interest for every month it remains unpaid. Delaware Corporations are also required to file an annual report besides paying the Franchise Tax. Foreign corporations that wish to do business in the state of Delaware are required to file an annual report with the secretary of state on or before June 30th every year.
Delaware Franchise Tax Rules & Calculation
It has nothing to do with the actions or the income of your business; it is only required to keep your business operating. Franchise Tax is the tax collected by the state of Delaware for the right to own a Delaware company. This tax has nothing to do with the income or activity of the company. The state of Delaware requires you to maintain it as the standing status of your company. Form your US LLC & C-Corp in minutes and handle taxation, accounting and bookkeeping. Remote & easy US company setup from anywhere in the world.
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Paying Franchise Tax For Business Entities Other Than Corporations
The total gross assets should be the “total assets” reported on US form 1120, schedule L (federal return) for the company’s fiscal year ending the calendar year of the report. The tax rate considered in this calculation is $400 per million. To utilize this approach, you need to provide the numbers for all shares issued (including treasury shares) and the total value of gross assets in the designated sections of the corporation’s annual report. The total gross assets should correspond to the “total assets” figure reported on the U.S.
The minimum tax for companies using the Assumed Par Value Capital Method is $400. With either method the maximum tax is $200,000, unless the company has been identified as a “large corporate filer,” in which case their tax will be $250,000.00. A Delaware Certificate of Good Standing is a document issued by the Secretary of State that shows the ability of a corporation to do business. If you have an overdue Delaware franchise tax, The Secretary of State will not issue a Good Standing status for your company.
The franchise in franchise tax refers to the State’s authorization for a company to incorporate in the state or do business there. Most aspiring companies end up incorporating in Delaware to reap the benefits of robust case law and a pro-business attitude. But being a Delaware corporation also comes with franchise tax liability, each and every year. This the USD value of your gross assets at the financial year-end, usually December 31st for many businesses, unless you have chosen a different tax year deadline. The State of Delaware no longer mails hard copy annual reports. Instead, Registered Agents forward a notification letter in December.
To use this method, you are required to list all the assets and shares your company has. It is quite a complicated process of calculation. Please feel free to contact us to get help about this method. However, for LLCs, LPs and LLPs, they are only required to pay an annual tax. Taxes should be received by the Delaware Department of State on or before June 1st of each year.
You’ll find a list of tax years during which your business has been eligible for franchise tax. Next to the year you’d like to file for, click File Annual Report. Most non-US owners, without a physical presence in the US, have a US mailing address and their local country office address (or home-office) as the principal place of the business address. Gross assets may differ for accrual basis and cash basis balance sheets. If you have filed tax returns previously, you would know whether you are cash or accrual basis.