Delaware franchise tax calculator

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So step 1 in the directions below is what you’ll multiply against your total number of shares, then you divide by 400/1,000,000 to get to what you owe. Note that a single additional authorized share will cause this startup to pay an extra $85. There is a $200 penalty for failure to file a complete report by the due date. Also, the Secretary of State will not issue a Certificate of Good Standing for a corporation that owes franchise taxes or a completed report. You’ll incur a $200 penalty if you don’t file an annual report on or before March 1. You’ll also pay 1.5% per month applied against any unpaid tax and penalty.

  • When completing the calculation, you must round up to the next million.
  • Business that are formed out of state but are registered to do business in Delaware must pay a $125 registration fee.
  • The Delaware Franchise Tax for a corporation is based on your corporation type and the number of authorized shares your company has.
  • The franchise tax is paid online at the Division of Corporations website.

In addition to paying the franchise tax, businesses incorporated in Delaware must also file an annual report and pay a small filing fee. If the Delaware Franchise Tax calculation uses the assumed par value capital method, the gross assets and issued shares are also to be listed. If you decide to pay your Delaware Franchise Tax for a corporation with us over the phone, the annual report would need to be separately submitted to us by email, fax or mail. Certain exempt domestic corporations like charities, civic organizations and religious organizations do not have to pay the franchise tax.

How to reduce your company’s Delaware Franchise Tax

To locate the exact company for which you want to pay Delaware Franchise Tax, enter the company name in the field below and click the Search button. We are unable to search for your company by name with the state’s system at this time. Help us limitations of trial balance have a productive first consultation by providing some additional information. Harvard Business Services, Inc. guarantees your annual Delaware Registered Agent Fee will remain fixed at $50 per company, per year, for the life of your company.

  • The total cost of the corporation’s Delaware Franchise Tax consists of an annual report fee and the actual tax due.
  • For these reasons, more than a million businesses are incorporated in Delaware, including more than half of all publicly traded and Fortune 500 companies.
  • After paying their Delaware Franchise Tax, many business owners require a Delaware Certificate of Good Standing.
  • If your APVC is $1,000,001, you do not owe $350, you must round up to $2,000,000, which means you owe $700.

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. You must file your annual report if your business is a corporation and pay your franchise tax and filing fee by March 1.

What Method Should I Use?

They mail your official business address an annual reminder to pay your franchise taxes. 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 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.

Who has to pay the franchise tax?

The HBS Blog offers insight on Delaware corporations and LLCs as well as information about entrepreneurs, startups and general business topics. This is not the same as your Delaware annual report and will not mention internal company information, such as director or officer details. 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 methods of calculating Delaware Franchise Tax are detailed below. Read on to find out how much you’ll pay, or visit our Delaware Franchise Tax calculator app for a quick answer.

Let Cleer File your Delaware Franchise Tax

Every for-profit corporation incorporated in Delaware is subject to the annual franchise-tax requirement. The corporation does not have to be doing business in Delaware or earn any income there. If you’ve authorized 5,001 to 10,000 shares, your franchise tax is $250.

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. You will pay tax to the state on that income on your individual state tax return. The tax rate will depend on your overall taxable income that year. LLC/LP’s benefit by only having to pay a $300 flat fee for Franchise Tax (not including any filing fees from a Registered Agent). Although not as common, the Investor Rights Agreement may also make reference to the par value of preferred shares.

Often, the tax is then calculated to the minimum payment of $350, with a $50 annual report fee. If your company falls into the maximum stock option of 5001 or more shares, there are two possible methods to calculate the Delaware franchise tax. The first is the use of virtual mailboxes, which Delaware does not accept because they require a physical address to know where your company is actually operating from. As a last resort, the CEO can list their personal address, but this is not ideal for everyone. 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.

While this may seem like a fine idea at the time, it leads to major tax consequences later. In Delaware, less stock and a smaller par value will result in a far smaller tax bill each year (a Delaware LLC, by contrast, will pay a flat tax each year that does not fluctuate). As long as your issued shares constitute a third to half of your authorized shares, this method will save you money. If you don’t file your Delaware franchise tax on time, you will be charged a late fee. If your Delaware franchise tax is submitted late, a $125 late fee and interest fee of 1.5 percent will be charged.

What about the annual report?

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. Whether your business is physically in Delaware or not, you don’t pay any state taxes. The limited partnership or LP franchise tax is also due on June 1. This is the first method that is typically used to calculate tax. Payment can be submitted with an electronic check or credit card.