Delaware Annual Franchise Tax

A Delaware Annual Franchise Tax is charged by the State of Delaware. The tax allows ownership of a Delaware company. Its purpose is to make sure your company maintains a good standing.

Paying the annual Franchise Tax in no way implies that your company operates as a franchise, nor does it affect the income generated by the company or any company activities.

When Is the Franchise Tax Due in Delaware?

There are three tax due dates, and the one that applies to you depends on what type of company you are operating. For each, the Franchise Taxes being paid are for the previous year. The three company types are:

  • Corporation – Franchise Tax is due each year by March 1.
  • Delaware LLC – Franchise Tax is due each year by June 1.
  • Limited Partnership or (LP) – Franchise Tax is due by June 1.

There is a penalty of $200 for paying late, and a 1.5 percent monthly interest fee is imposed by the state for Franchise Taxes not paid by June 1 for Delaware LLC or LP companies.

For Franchise Taxes not paid by March 1 for corporations, the state imposes a late penalty of $125 and a 1.5 percent monthly interest fee.

How Is the Franchise Tax in Delaware Calculated?

How the Franchise Tax is calculated depends on the company type.

  • Delaware LLC – As of July 1, 2014, the Franchise Tax is set at $300 annually.
  • Delaware LP – The same annual $300 rate is in effect.
  • Corporation – The Franchise Tax is a combination of the amount of tax due plus an annual report fee. It is also based on how many authorized shares the company has access to.
  • Minimum Stock Corporation – As of July 1, 2014, the total due each year is $225 for corporations that have fewer than 5,000 authorized shares. The $225 total includes the annual report fee of $50 and the Franchise Tax of $175.
  • Maximum Stock Corporation – For corporations that have 5,001 or more authorized shares, a $50 annual report fee is required. The estimated tax range is between $200 and $180,000 each year.
  • Non-stock/non-profit – This type of company pays only a $25 annual report fee. There is no annual tax payment.

Two methods are used to calculate taxes for a corporation with stock.

  • Authorized Shares Method – This method calculates the total of authorized shares. It does not calculate shares that are issued to shareholders.
  • Assumed Par Value Capital Method – This method is generally used if your company has received a bill from the state of Delaware for a significant amount of money, up to tens of thousands of dollars.

What Is the Delaware Annual Report?

The Franchise Tax for domestic Delaware corporations requires that businesses submit an annual report every March 1st. The annual report is filed online, and you can pay a fee to a Delaware Registered Agent who can then file the corporation's annual report.

What Is the Annual Registered Agent Fee?

By law, you are required to have a Delaware Registered Agent. The agent's responsibility is to accept service of process. Their annual fee is included in your yearly compliance costs.

The Delaware Registered Agent fee is separate from the Franchise Tax fee. The State of Delaware imposes the Franchise Tax. The Registered Agent fee is paid to registered agents.

What Else Do I Submit with My Payment?

When submitting a Franchise Tax payment, an annual report must be included. The annual report must include the following:

  • Company's physical address.
  • Name of at least one director along with his or her physical address.
  • Name, physical address (no P.O. Box) and title of at least one officer, if applicable.

If using the Assumed Par Value calculation, the annual report must also include a list of issued shares and the company's gross assets.

What Is Required Once the Franchise Tax is Paid?

Once the Franchise Tax is paid, business owners can request a Delaware Certificate of Good Standing that certifies the date of formation of the company in the state of Delaware. It will also note that the company is in good standing and is current regarding all applicable Delaware taxes. The form is issued directly from the office of the Delaware Secretary of State.

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