As a result, it is important to make sure that the Franchise Tax is paid on time and in full to avoid any negative consequences. The HBS Blog offers insight on Delaware corporations and LLCs as well as information about entrepreneurs, startups and general business topics. LegalZoom is not a law firm and does not provide legal advice, except where authorized through its subsidiary law firm LZ Legal Services, LLC. Use of our products and services is governed by our Terms of Use and Privacy Policy. 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. Since 1981, Harvard Business Services, Inc. has helped form 427,231 Delaware corporations and LLCs for people all over the world.
How to File a Delaware Annual Report
The amount of tax that a corporation has to pay depends on the number of shares that the corporation has. If a corporation has more than 1,500 shares, it has to pay $175 for every 1,000 shares. If a corporation has less than 1,500 shares, it has to pay $350 for every 1,000 shares. 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. If your company is no longer operating, it’s important to close your Delaware business and end these fees.
When is the deadline to submit a Delaware annual report?
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%. Senior officer positions are typically governed by the corporation’s board of directors.
- The corporate-friendly climate in Delaware motivates many people to start their business endeavors in the state.
- Delaware corporations, LLCs, limited partnerships, and general partnerships are required to pay franchise tax, but nonprofits and sole proprietorships are typically not subject to this tax.
- Every corporation that is incorporated in Delaware or does business in Delaware has to pay the Delaware Franchise Tax.
- The Delaware Franchise Tax is a tax that is imposed on businesses that are incorporated in the state of Delaware.
How do I pay the Delaware Franchise Tax online or by mail?
Delaware state franchise tax is an annual tax imposed on many business entities for the privilege of doing business in the state. Delaware corporations, LLCs, limited partnerships, and general partnerships are required to pay franchise tax, but nonprofits and sole proprietorships are typically not subject to this tax. Once the required information is provided, finish the process by paying the annual report filing fee and submitting your franchise tax payment (if required). An annual report (also called a statement of information in some states) is a document that is submitted to the state in which the business is registered and/or conducts business.
The amount of the tax is based on the gross receipts of the business, which means that it goes up as a business makes more money. The tax is typically paid annually, but businesses can choose to pay it quarterly or monthly if they prefer. Non-profit organizations are exempt from the tax, but they still have to file a return with the state showing their gross receipts. The franchise tax for an LLC or LP in Delaware is a flat annual rate of $300.
A non-stock, nonprofit company will not pay the standard yearly fees but must still file and submit reports on their activity each year with no other requirements put upon them by law. A corporation with 5,001 authorized shares or more is considered a maximum stock corporation. The annual report fee is $50 and the tax would be somewhere between $200 and $200,000 per year, as illustrated below. The Delaware Franchise Tax for a corporation is based on your corporation type and the number of authorized shares your company axa insurance dac definition has.
What Happens if Delaware Franchise Tax Is Paid on Time?
Yes, nonprofits registered in Delaware, which typically fall under the umbrella of “exempt domestic corporations,” still need to file a Delaware annual report. However, the $25 filing fee is less than non-exempt corporations, which owe $50. A corporation with 5,000 authorized shares or less is considered a minimum stock corporation. The Delaware annual report fee is $50 and the tax is $175 for a total of $225 due per year. All applicable business entities pay the Delaware annual franchise tax through the Division of Corporations’ online portal, where you can file annual reports and pay taxes due.
This calculation saves taxes by total assets, as long as issued shares constitute a third to half of the authorized ones and it will save money for startups with this technique. The Delaware Franchise Tax is an annual tax that must be paid by all corporations that are registered in the state. If a corporation does not pay the Franchise Tax on time or in full, there are a variety of consequences that may result. This tax is imposed on businesses operating in the state, and there are a few things that you need to know about it.
It provides basic information about the company, such as where it’s located, who the registered agent is, the names of its directors, and its financial status. States that require annual reports use these documents as a way to take a pulse on how the business is doing and ensure that it’s in compliance with state regulations. 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.