Provide managerial finance all relevant documentation such as proof of payment and the reason for the refund request. Refunds are processed on a case-by-case basis, and approvals are not guaranteed. Franchise Taxes and annual Reports are due no later than March 1st of each year. At any moment, executives or team members may own public or private stock in any of the third party companies we mention.
This flat fee structure simplifies the process and allows for easier compliance for LLCs, due annually by June 1st. By utilizing the Delaware Franchise Tax Calculator, business owners can stay informed and prepared, ensuring they meet the state’s tax obligations and avoid any penalties. This valuable service makes managing Delaware franchise tax requirements more accessible and clear for businesses of all sizes. In summary, Delaware’s Franchise Tax affects various business entities, including corporations, LLCs, LPs, and General Partnerships. Maintaining good standing in the state requires these entities to pay this tax, irrespective of whether they conduct business within Delaware or not. When it comes to paying the Delaware Franchise Tax, businesses have several options available to them.
Who has to pay the franchise tax?
And the maximum franchise tax for all corporations using either method is $200,000. Corporations with 1,500 shares or less and NO par value will always have a maximum tax of $175. It is a requirement that all Delaware corporations file an annual report. Interestingly, corporations incorporated in Delaware but not conducting business within the state are not subject to the Corporate Income Tax1.
Payment of 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. If your DE franchise tax seems too high, use our calculator to see if your CPA used the wrong calculation method, and read our info on how the calculation method can dramatically increase the tax bill. In conclusion, the Delaware Division of Corporations and official state government resources provide a wealth of information and assistance for businesses to understand and meet their franchise tax obligations.
It often includes details about the classes of stock the corporation is authorized to issue, including the par value of each class. For VC-backed startups, it will specifically mention the par value of preferred shares. Any changes to these details typically require an amendment to the Certificate of Incorporation. Our Delaware Franchise Tax Calculator was developed to help you understand and plan for how much you’ll likely need to pay your Delaware Franchise taxes for your Delaware business. Delaware’s taxation structure has different tiers for LLCs, LPs, non-profit corporations, and for-profit corporations.
How to reduce your company’s Delaware Franchise Tax
In summary, it is crucial for Delaware corporations to be aware of the annual filing requirements, including completing the Annual Franchise Tax Report, paying the respective fees, and meeting the due dates. This ensures compliance with state regulations and avoids unnecessary penalties and interest charges. Depending on the size of the corporation, this method straight line depreciation method can be a more straightforward approach to calculating the Delaware franchise tax.
- You’ll incur a $200 penalty if you don’t file an annual report on or before March 1.
- This can significantly increase the financial burden for businesses that delay their payments.
- 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.
- Corporations are required to pay this fee for the privilege of doing business in the state.
- 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.
The Division of Corporations is a part of the Delaware Department of State that handles franchise tax administration. Corporations not conducting business in Delaware still have to pay a franchise tax, which is collected annually by the Department of State. The minimum franchise tax is $175 for corporations using the Authorized Shares method and $400 for corporations using the Assumed Par Value Capital Method. The choice between these two methods ultimately depends on the nature and size of the specific corporation, as well as its financial structure and performance. This foundational document is filed with the state to legally form the corporation.
IMPORTANT CONSUMER ALERT ABOUT CORPORATE RECORDS SERVICE SCAM
Franchise and corporate taxes are not the same thing, and most DE C-Corps that we advise do not have to file for corporate taxes in the state. All Delaware C-Corps are required to file a federal income tax return on Form 1120, even if they have incurred losses. This filing is typically due on April 15th and can be extended until October 15th. In addition to these accrual basis taxes, Delaware C-Corps may also have to deal with other taxes such as income tax, gross receipts tax, payroll tax, sales tax, SaaS tax, property tax, and foreign tax. It is important to consult with a tax CPA to ensure compliance with all tax requirements.