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DELAWARE FRANCHISE TAX FILING
Every for-profit corporation formed in Delaware is subject to Delaware franchise tax filing. The corporation is not required to do business or generate revenue in Delaware.
It is a franchise tax, not an income tax. The applicant is paying for the privilege of forming a Delaware corporation and maintaining that status.
In general, non-profit corporations are not required to pay a franchise tax. They must still submit an annual report by March 1. (There is a $25 filing fee.)
If you wish to incorporate a new business in Delaware, refer to our page, Delaware Company Incorporation.
CALCULATING THE FRANCHISE TAX
A corporation must pay the franchise tax in addition to a $50 filing fee. There are two different ways of determining the franchise tax.
The state calculates the tax using the authorized Shares approach and shows the amount due on its notice because that is the default way. The Assumed Par Value Capital Method can be used to recalculate the amount for the corporation.
AUTHORIZED SHARES METHOD
This approach has a minimum tax obligation of $175 and a maximum tax obligation of $200,000. The number of authorized shares determines the amount of tax due. (According to its certificate of incorporation, that is the most shares the corporation may issue.) The tax is computed using the formula below:
- 1 to 5,000 shares: $175
- 5,001 to 10,000 shares: $250
- $85 is added for each extra 10,000 shares or portions thereof.
ASSUMED PAR VALUE CAPITAL METHOD
Except in cases where the corporation has been designated as a large corporate filer, the tax is $400 minimum and $200,000 maximum. For each $1 million (or fraction thereof) of assumed par value capital, the tax rate under this method is $400.
LARGE CORPORATE FILER
The annual tax for large corporations is $250,000. Large corporate filers have a class or series of stock listed on a national securities exchange and that report both of the following in financial statements: (1) consolidated annual gross revenues equal to or greater than $750 million; (2) consolidated gross revenues not less than $250 million; and (3) consolidated assets not less than $250 million.
Businesses that owe $5,000 or more must pay estimated taxes in installments every three months.
ANNUAL FRANCHISE TAX REPORT IN DELAWARE
The following data is mentioned in the report:
- The registered office and registered agent
- The main business location
- Number of authorized shares and par value
- The directors’ full names and addresses
- The report’s signatory officer’s name and address
It is necessary to submit the Annual Franchise Tax Report online.
PROCESS OF SUBMITTING THE DELAWARE ANNUAL FRANCHISE TAX REPORT ONLINE
- The applicant must find their seven-digit Delaware Business Entity File Number using their certificate of incorporation.
- This Delaware Business Entity File Number can be used to log onto the state of Delaware’s website.
- Select the option for Annual Report File. Make sure to select the appropriate tax year.
- Write the total number of shares that have been issued, gross assets, asset date, fiscal year-end date, etc.
- To determine the annual tax liability, click the Recalculate Tax option.
- Fill in the IRS Employer Identification Number and company address.
- Enter one company’s officer’s name and contact information and company director’s information.
- Press the green “Proceed to Payment” button after verifying the provided information.
PENALTIES FOR NON-COMPLIANCE
Failure to submit a comprehensive report before the deadline carries a $200 fine. Additionally, if a corporation owes franchise taxes or a completed report, the Secretary of State will not issue a Certificate of Good Standing for that corporation. The company’s charter will be revoked if it neglects to pay the franchise tax for more than a year or fails to provide a complete franchise tax report.
Reach out to us at Relin Consultants for further assistance with your Delaware franchise tax filing.
Are there any additional costs associated with submitting the Delaware annual report for my corporation?
A $50 extra filing fee is charged by the Delaware Secretary of State for a Delaware corporation’s annual report. Exempt corporations must submit an annual report for $25.
What is meant by "Principal Place of Business"?
The actual location of the business is known as the Principal Place of Business. A Post Office Box address is not acceptable; the address must be the real street address, together with the city, state, and postal code.
How do I figure out the non-exempt non-stock corporation franchise tax?
All non-exempt non-stock corporations are required to pay a $175 franchise tax. There isn’t another tax calculation method available.
Are Annual Reports in Delaware Public?
Every yearly report and the data included within become a part of the business’s official filing history. The Secretary of State’s office maintains electronic copies of the Delaware yearly reports, and the reported information cannot be accessible to the general public. As a result, it is not possible to view an annual report that has been submitted to the State of Delaware online.
Who has the power to sign the annual report and submit it?
An officer or director of the firm may sign and file your annual Delaware Franchise Tax report, but only one of the individuals named in the annual report’s officer and director section shall be the authorized signatory.
If my company hasn't done any business, do I still have to pay the franchise tax?
In order to retain their corporate existence and good standing status, all businesses that are incorporated in the state of Delaware are required to pay an annual franchise tax and file an annual report. No matter whether the company has done any business, made any profit or loss, opened a bank account, or submitted a federal tax return, the annual Franchise Tax is still required.