You must file your annual report if your business is a corporation and pay your franchise tax and filing fee by March 1. All LLCs, Limited Partnerships, and General Partnerships formed in Delaware are required to pay the annual franchise tax by June 1. If the Delaware Franchise Tax calculation uses the assumed par value capital method, the gross assets and issued shares are also to be listed. Certain exempt domestic corporations like charities, civic organizations and religious organizations do not have to pay the franchise tax. However, they must still file an annual report and pay the filing fee. The Delaware franchise tax for a corporation is slightly more complicated.

A franchise tax, sometimes called a privilege tax, is a fee you pay for the privilege of doing business in a certain state. If so, that document can be sent directly from the Delaware Secretary of State. This document certifies the date the company was formed, that the company is current, and that the company is in good standing. When you file your Delaware franchise tax, an annual report must also be filed. To reduce the taxes paid by a startup, use the Assumed Par Value method.

  • The methods of calculating Delaware Franchise Tax are detailed below.
  • If so, that document can be sent directly from the Delaware Secretary of State.
  • The Delaware franchise tax for foreign corporations is due by June 30 every year.
  • Corporations, LLCs and LPs are taxed in arrears, meaning the tax due by each due date is for the previous calendar year.

This leads to a high number of businesses being incorporated in those tax shelter states. 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.

When Is The Delaware Franchise Tax Due Date?

The Delaware franchise tax for foreign corporations is due by June 30 every year. This means that if you receive a high bill that was calculated under the first method, you can request a recalculation using the second method. Delaware LLC Franchise Taxes are due by June 1 of every year. 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%. Delaware Franchise Taxes for corporations are due by March 1 of every year.

  • Delaware Franchise Taxes for corporations are due by March 1 of every year.
  • As long as your issued shares constitute a third to half of your authorized shares, this method will save you money.
  • This is the first method that is typically used to calculate tax.

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. The tax is then often calculated to the minimum payment of $400 tax plus the $50 annual report fee, for a total of $450 due per year. In addition to paying the franchise tax, businesses incorporated in Delaware must also file an annual report and pay a small filing fee.

Who has to pay the franchise tax?

You will also be charged a 1.5 percent monthly interest on the amount due. This article focuses on businesses that are operating solely in Delaware. If your business is operating in multiple states, your business may have “nexus” with those other states.

How Do I Pay My Delaware Franchise Tax?

If you pay your Delaware franchise tax late, you’ll be charged a late fee. The late fee is $125.00 and a 1.5 percent monthly interest afterward. You’ll incur a $200 penalty if you don’t file an annual report on the complete wave accounting software review 2019 or before March 1. You’ll also pay 1.5% per month applied against any unpaid tax and penalty. If your Delaware franchise tax is submitted late, a $125 late fee and interest fee of 1.5 percent will be charged.

Whether your business is physically in Delaware or not, you don’t pay any state taxes. This is the first method that is typically used to calculate tax. Payment can be submitted with an electronic check or credit card. For questions, contact the Harvard Business Services, Inc.

The Assumed Par Value Capital method: an example

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. 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.

The total cost of the corporation’s Delaware Franchise Tax consists of an annual report fee and the actual tax due. Non-stock or non-profit companies are considered exempt from tax in Delaware. The Delaware franchise tax is beneficial to corporations because it is a simple process to submit and calculate payment. The Delaware franchise tax is also beneficial to businesses as it is a small fee in comparison to other states.

Special Cases for Delaware Franchise Tax

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 State of Delaware allows you to pay the lower of the two Delaware Franchise Tax calculation methods. Let’s imagine a Delaware-incorporated company reported total gross assets of $1,000,000 on their federal taxes this year. 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.

When you submit your Delaware franchise tax payment, you’ll also need to submit an annual report. The goal of the Delaware franchise tax is to make owning a business in Delaware simple. Since the tax payment process is simple, businesses are more likely to want to be incorporated in Delaware.