Delaware franchise tax: an overview

The Delaware Franchise Tax and the Registered Agent Fee are two separate, unrelated fees. The annual Franchise Tax is imposed by the State of Delaware and varies with the size of your business. The annual Registered Agent Fee is a fixed amount paid to Harvard Business Services, Inc. to act as an agent for your entity in the state. Corporations, 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.

A corporation with 10,005 shares authorized pays $335.00($250.00 plus $85.00). Our intuitive software automates the busywork with powerful tools and features designed to help you simplify your financial management and make informed business decisions. The HBS Blog income statement offers insight on Delaware corporations and LLCs as well as information about entrepreneurs, startups and general business topics.

For corporations using the Assumed Par Value Capital Method, the minimum franchise tax is $350 and the maximum tax is $200,000; however, for the 2018 tax year, the minimum will increase to $400. If you form a corporation in Delaware, you must pay an annual Franchise Tax for the privilege of incorporating in Delaware. The fee is based on the number of authorized shares within the corporation. The example cited below is for a corporation having 1,000,000 shares of stock with a par value of $1.00 and 250,000 shares of stock with a par value of $5.00 , gross assets of $1,000,000.00 and issued shares totaling 485,000. The Delaware franchise tax is collected every year by the Delaware Department of State.

Franchise Tax is the fee imposed by the State of Delaware for the right or privilege to own a Delaware company. 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. The Division of Corporations recommends that consumers be alert to deceptive solicitations. Delaware legal entities should view suspiciously any correspondence, via regular mail or e-mail, that does not come directly from the State or the entity’s Delaware registered agent.

1. If the Annual Report and remittance is not received by the due date, a $125.00 penalty will be added to filing fee.
2. The Delaware Franchise Tax and the Registered Agent Fee are two separate, unrelated fees.
3. A franchise tax, sometimes called a privilege tax, is a fee you pay for the privilege of doing business in a certain state.
4. Let’s also assume the number of shares issued and authorized is the same for simplicity’s sake.
5. Since 1981, Harvard Business Services, Inc. has helped form 427,231 Delaware corporations and LLCs for people all over the world.

What happens if I don’t pay?

Any corporation that is incorporated in Delaware (regardless of where you conduct business) must file an Annual Franchise Tax Report and pay Franchise Tax for the privilege of incorporating in Delaware. 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). For these reasons, more than a million businesses are incorporated in Delaware, including more than half of all publicly traded and Fortune 500 companies. 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: an overview

The annual report fee is $50 and the tax would be somewhere between $200 and $200,000 per year, as illustrated below. The Delaware annual report and franchise tax payment are both due by March 1. Your notification of annual report and franchise tax due is sent to a corporation’s registered agent in December or January of each year.

File Your Delaware Personal Taxes

All LLCs, Limited Partnerships, and General Partnerships formed in Delaware are required to pay the annual franchise tax by June 1. In addition to paying the franchise tax, businesses incorporated in Delaware must also file an annual report and pay a small filing fee. 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. To use this method, you must give figures for all issued shares (including treasury shares) and total gross assets in the spaces provided in your Annual Franchise Tax Report.

The State of Delaware allows you to pay the lower of the two Delaware Franchise Tax calculation methods. Therefore, if you receive a tax bill for tens of thousands of dollars, it may be in your best interest to try calculating your Delaware Franchise Tax with the assumed par value capital method. If you’re ready to file and pay your Delaware Franchise Tax now, please visit our online Franchise Tax payment form. A corporation with 100,000 shares authorized pays $1,015.00($250.00 plus $765.00$85.00 x 9).

Do I Need to Submit Anything Else With My Delaware Franchise Tax Payment?

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%. The term “Franchise Tax” does not imply that your company is a franchise business. The factors are property, wages and sales in Delaware as a ratio of property, wages and sales everywhere (Chapter 19, Title 30, Delaware Code). Foreign Corporations must file an Annual Report with the Delaware Secretary of State on or before June 30 each year.