When paying the annual report fee, corporations are sorted into two categories. Along with your business’s annual Delaware franchise tax, your business is required to submit a Delaware annual report. Both the Delaware annual report and the Delaware franchise tax are due by March 1 each year. This calculator is designed to estimate your Delaware franchise tax. Corporations must complete an annual report along with their Delaware Franchise Tax payment. The term “Franchise Tax” does not imply that your company is a franchise business.

  • Use the calculation method in our estimator above to estimate how much you likely owe.
  • The online fee will vary depending on when the online payment is submitted.
  • The term “Franchise Tax” does not imply that your company is a franchise business.

Let’s also assume the number of shares issued and authorized is the same for simplicity’s sake. 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.

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. Don’t panic – your Delaware Franchise Tax is likely so high because your accountant has used the wrong calculation method. Use the calculation method in our estimator above to estimate how much you likely owe. Your company will likely need to use the assumed par value calculation method instead of the authorized share method of calculation.

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. If you incorporated in Delaware, you need to pay a Delaware Franchise Tax. The calculator below will help you estimate how much you’ll need to pay.

What Should I Do After Paying My Delaware Franchise Tax?

Business that are formed out of state but are registered to do business in Delaware must pay a $125 registration fee. 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. The due date of your Delaware Franchise Tax payment varies, depending on your company type. Let’s also imagine it has authorized and issued 100,000 shares at a par value of $2.00 each, and 100,000 shares at par value of $10.00 each.

  • Stock is generally authorized on the Certificate of Incorporation (whereas stock is issued in the bylaws or sold on a public exchange).
  • We’ve seen startups get a huge tax bill when this calculation method is used; let’s do an example of a typical, venture backed startup.
  • However, they must still file an annual report and pay the filing fee.

Delaware Franchise Taxes for corporations are due by March 1 of every year. If the tax is not paid on or before March 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 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. When you submit your Delaware franchise tax payment, you’ll also need to submit an annual report. In addition to corporations, Delaware limited liability companies (LLCs), general partnerships, limited partnerships (LPs) and limited liability partnerships (LLPs) must also pay franchise taxes. Let’s imagine a Delaware-incorporated company reported total gross assets of $1,000,000 on their federal taxes this year.

What happens if I don’t pay?

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. You will also be charged a 1.5 percent monthly interest on the amount due. Your Delaware franchise tax due date depends on the type of business you own. Foreign corporations, those that are formed outside of Delaware, cannot file online.

Who has to pay the franchise tax?

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. This is not the same as your Delaware annual report and will not mention internal company information, such as director or officer details. Delaware LLCs do not have to complete the annual report, but still pay the $300 Delaware LLC Franchise Tax fee.

Delaware Franchise Tax Assumed Par Value Method

Like the personal income tax the federal business tax is bracketed based on income level, with eight corporate tax brackets. The Delaware franchise tax for a corporation is slightly more complicated. 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. The Delaware Franchise Tax for a corporation is based on your corporation type and the number of authorized shares your company has. The total cost of the corporation’s Delaware Franchise Tax consists of an annual report fee and the actual tax due.

How much do I owe in Delaware franchise taxes?

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. Most VC backed startups will have very low par value shares, meaning that you’ll end up using the assumed par value in the franchise tax calculation. 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.

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. Corporations, how to use financial reports to calculate the number of days in accounts payable 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. If your company is no longer operating, it’s important to close your Delaware business and end these fees.

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