Delaware Franchise Tax: Everything You Need to Know

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. When you file your Delaware franchise tax, an annual report must also be filed. You will also be charged a 1.5 percent monthly interest on the amount due. This article focuses on businesses that are operating solely in Delaware.

  • Multistate taxes and determining nexus can be very complicated.
  • Corporations must complete an annual report along with their Delaware Franchise Tax payment.
  • To use this method, you must supply the company’s total gross assets and the total number of issued shares.
  • The Delaware franchise tax for a corporation is slightly more complicated.

The annual franchise tax is required and paid to the state of Delaware. As long as your issued shares constitute a third to half of your authorized shares, this method will save you money. Foreign corporations, those that are formed outside of Delaware, cannot file online. With this type of business, your business income will be distributed to you as the sole proprietor.

The registered agent will charge a small fee to complete the filing of your Delaware franchise tax. Delaware franchise tax is a tax charged by the state of Delaware for the right to own a Delaware company. The tax does not affect income or company activity.

Reasons to consider using Delaware Franchise Tax

The tax is then often calculated to the minimum payment of $400 tax plus the $50 annual report fee, for a total of $450 due per year. If the Delaware Franchise Tax calculation uses the assumed par value capital method, the gross assets and issued shares are also to be listed. A corporation with 5,001 authorized shares or more is considered a maximum stock corporation. The annual report fee is $50 and the tax would be somewhere between $200 and $200,000 per year, as illustrated below. A corporation with 5,000 authorized shares or less is considered a minimum stock corporation. The Delaware annual report fee is $50 and the tax is $175 for a total of $225 due per year.

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. As your Registered Agent, we will send you tax reminders both by mail and email, well in advance of the due date. We offer a tax filing service for a small fee in addition to your Franchise Tax amount. For a discounted rate you can submit your Delaware Franchise Tax payment via our online Franchise Tax form.

It is based on the corporation type and authorized shares. 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. When you submit your Delaware franchise tax payment, you’ll also need to submit an annual report.

How Do I Pay My Delaware Franchise Tax?

Whether your business is physically in Delaware or not, you don’t pay any state taxes. This is the first method that is typically used to calculate tax. Payment can be submitted with an electronic check or credit card.

What Should I Do After Paying My Delaware Franchise Tax?

Since 1981, Harvard Business Services, Inc. has helped form 382,086 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. After paying their Delaware Franchise Tax, many business owners require a Delaware Certificate of Good Standing. The due date of your Delaware Franchise Tax payment varies, depending on your company type.

Along with your business’s annual Delaware franchise tax, your business is required to submit a Delaware annual report. Both the Delaware annual report and the Delaware franchise tax are due by March 1 each year. Our annual Registered Agent Fee is $50 per year, and is due on the anniversary month of the formation of your company.

Special Cases for Delaware Franchise Tax

A tax haven or shelter is a method of reducing taxable income which results in a reduction of tax payment. The method is any that recovers is land a current asset more than $1 in tax for ever $1 spent within a four-year period. A tax shelter can be created by an individual or a corporation.

Non-stock or non-profit companies are considered exempt from tax in Delaware. These types of companies must file an annual report fee. Often, the tax is then calculated to the minimum payment of $350, with a $50 annual report fee. Owners of multiple corporations will need to pay Delaware Franchise Tax for each entity separately as each entity is required to file an annual report. 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.

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 term “Franchise Tax” does not imply that your company is a franchise business. 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. Delaware provides a favorable tax shelter for U.S. corporations.

How Do I Calculate My Delaware Franchise Tax?

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. Multistate taxes and determining nexus can be very complicated.

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