1. About the Delaware Franchise Tax
2. Delaware Annual Report Requirements

The Delaware corporation annual renewal is required by the Delaware General Corporation Law. It states each corporation in the state of Delaware needs to file a yearly report and pay the Delaware franchise tax each year before or on March 1. A franchise tax is a privilege fee for being given a special license by the state to perform business under the state's laws. This is assessed no matter what the business activity is. It isn't an income tax. It's a flat fee that's based on the corporation's authorized stock.

About the Delaware Franchise Tax

There are 1,500 shares in most corporations, which are known as minimum stock corporations. They will pay $175 in taxes in addition to a filing fee of $50. Non-profit corporations only pay $25. Corporations who have a large amount of authorized shares may be required to pay up to $180,000 in taxes. If a company that's small has many insignificant assets and authorized shares, they can recalculate their stock based on what the company's assets are down to around $400. This depends on a complex formula using issued stock and assets.

A company that fails to pay or submit their report on time goes into arrears. The state can then revoke the charter of the company. The first stage of arrears is the X status. After two years, it goes into void status. If a company gets declared void, they can be reinstated later if they file a Certificate of Renewal and Revival. There are fees for the renewal, and the previous yearly reports must be filed at the same time. Reinstating a company that's void will retroactively ratify the time period it was in good standing so it appears that the company was always in good standing.

You can visit the Delaware government's website to file your report and see what your franchise tax fee will be if you have over 5,000 authorized shares. Any foreign corporations can send in their franchise tax to: Delaware Division of Corporations, Attention Franchise Tax, 410 Federal Street, STE 4, Dover, DE 19901.

Delaware Annual Report Requirements

In the yearly report, all corporation directors and their addresses need to be disclosed, including the name of at least one officer. Director names must be current at the time when the report is filed and not from another point in time.

Some smaller businesses think they don't have directors because they only know the roles of their stockholders and officers, such as president, treasurer, or secretary. However, each corporation in Delaware has at least one director. They're essential when it comes to connecting officers to stockholders:

  • Stockholders elect directors each year, who then appoint the officers.
  • Stockholders can't directly elect the officers.
  • Since stockholders can't elect officers, at least one director is required.
  • You can't check the box that says no directors as this is misrepresenting the company.

The state no longer sends companies green check paper forms to filled out and returned. Instead, all annual reports must now be entered online. Many agents have their own online services that let you finish the annual report in a format that's easier than the one on Delaware's website. The state does not save information from year to year and won't take American Express.

Once the registered agent gets the name of an officer and the directors' information, the system will then send in the report to the Division of Corporation to be filed by XML. The state can then generate a report that goes on public record and shows the information that was entered online. There was some resistance to this when it first launched, but it's now been accepted by the proprietors of Delaware companies and the agent community.

The only way you can file a corporate yearly report with Delaware when you have a domestic corporation is to pay a registered agent to do it or file online. However, there's no reason to pay someone to enter in the exact information you just gave them, so it's best to do it yourself. You can do this on the Delaware Division of Corporations Website.

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