Delaware: Annual Franchise Report & Tax Requirement

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The limited partnership (LP) Franchise Tax is also due by June 1 of every year. If the tax is not paid on or before June 1, the state imposes a $200 late penalty, plus a monthly interest fee of 1.5%. If you’re ready to file and pay your Delaware Franchise Tax now, please visit our online Franchise Tax payment form. The franchise tax is paid online at the Division of Corporations website. Business that are formed out of state but are registered to do business in Delaware must pay a $125 registration fee.

  • Use the calculation method in our estimator above to estimate how much you likely owe.
  • Any changes to these details typically require an amendment to the Certificate of Incorporation.
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  • The second method is the “assumed par value” method and is a more complicated formula based on shares issued and the company’s gross assets.
  • The franchise tax can be calculated based on one of two methods.

Also at Kruze, another option is working with a PEO; that is how you “Incorporate in a state.” Hope that helps, thanks. We often get the question, “why should my startup consider incorporating out-of-state and become a Delaware C-corp? Here are a few reasons why you would want to initially incorporate in Delaware. Please enter your Business Entity File Number below to start filing your Annual Report or Pay Taxes. If you need assistance in obtaining a Certificate of Good Standing, we can help you receive your certificate in two business days or less.

What about the annual franchise tax report?

All LLCs, Limited Partnerships, and General Partnerships formed in Delaware are required to pay the annual franchise tax by June 1. All Delaware-incorporated businesses must, however, still pay the annual franchise tax, submit an annual report, and pay a filing fee. Here’s how to figure out how much you need to pay, how to file, and what happens if you don’t. If DE sent your startup a huge tax bill for their annual franchise tax, don’t panic – you can likely reduce your Delaware Franchise Tax by using an alternative calculation method.

If so, that document can be sent directly from the Delaware Secretary of State. This document certifies the date the company was formed, that net 30 payment terms the company is current, and that the company is in good standing. The annual franchise tax is required and paid to the state of Delaware.

The calculator below will help you estimate how much you’ll need to pay. The deadline is typically the last day of February – scroll down to access links to visit the Delaware Division of Corporations webpage where you can pay. Franchise Tax is the fee imposed by the State of Delaware for the right or privilege to own a Delaware company.

Where should I file the DE Franchise Tax?

Your authorized share number is the maximum number of shares your corporation could sell based on your corporate bylaws or charter. If you’re trying to figure out if you owe Delaware franchise tax, Bench can help. We provide small businesses with a tax filing and bookkeeping solution. Our all-star team does your monthly bookkeeping for you and sends your financials to trusted tax professionals for a stress free filing experience. Many Delaware corporation owners form companies and authorize huge numbers of shares (millions, in some cases).

Delaware Annual Report

The tax is required to maintain the company’s good standing in Delaware. This calculator is designed to estimate your Delaware franchise tax. Our annual Registered Agent Fee is $50 per year, and is due on the anniversary month of the formation of your company. Corporations, LLCs and LPs are taxed in arrears, meaning the tax due by each due date is for the previous calendar year. The franchise tax is due even if the business didn’t conduct any activity or lost money.

Let Cleer File your Delaware Franchise Tax

If you’re not working with an accounting firm, you’ll need to total up your asset base and enter that number. Then you need to hit the “recalculate” button and wait while the system generates a new balance. The new number will very likely be lower than the original number you saw. Corporations must complete an annual report along with their Delaware Franchise Tax payment. The Delaware franchise tax is collected every year by the Delaware Department of State.

This agreement outlines the terms and conditions under which shares are sold and purchased. The par value of the preferred shares being transacted is usually specified here, along with other particulars like the issue price, number of shares, and payment terms. For most VC backed startups, the par value will be listed in one or more of the following legal documents. (Make sure you work with experienced attorneys so they don’t mess up important items like par value!) Your lawyer may also have put your par value into your cap table software. The minimum payment using the Assumed Par Value Capital method is $400, and there is no maximum. If you incorporated in Delaware, you need to pay a Delaware Franchise Tax.

If you’ve raised $10M in VC funding, you are going to owe closer to $4,000. If you’ve received a bill for $75K, it is because Delaware has calculated the tax using the Authorized Shares Method. Don’t freak out; recalculate using the Assumed Par Value Capital Method. The term “Franchise Tax” does not imply that your company is a franchise business. For every additional 10,000 shares authorized after that, you pay another $85 in franchise tax, up to a maximum of $200,000. Under this method, your franchise tax is based on how many shares your corporation has authorized.

How do I pay my franchise taxes and file the annual report?

However, they must still file an annual report and pay the filing fee. Non-stock or non-profit companies are considered exempt from tax in Delaware. A non-stock/non-profit company is considered exempt by the State of Delaware. This type of company does not pay the standard annual Delaware Franchise Tax, but must still file and pay the annual report fee of $25 per year. A corporation has to pay a $50 filing fee plus the franchise tax. The franchise tax can be calculated based on one of two methods.