Everything you need to know about Delaware franchise tax

Rather, it is a tax on the value of a company’s authorized shares or its total gross assets in the state of Delaware. For corporations, the tax is calculated based on the number of authorized shares of stock the company has. The amount of tax due is calculated by multiplying the number of authorized shares by a predetermined rate. The rate varies depending on the company’s total authorized shares, with higher rates applied to companies with a larger number of shares.

For every additional 10,000 shares authorized after that, you pay another $85 in franchise tax, up to a maximum of $200,000. Under this method, your franchise tax is based on how many shares your corporation has authorized. Delaware is one of several states in which your state income tax return can be filed after April 15. If you’re a business owner in Delaware, beginner’s guide to financial statements then you are most likely familiar with the annual franchise tax requirement. Delaware is a popular state for incorporation, and its business-friendly policies have made it an attractive destination for many corporations. However, with the many benefits of incorporation in Delaware, there are also some obligations that come with it, such as the franchise tax.

How are Delaware franchise taxes calculated?

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. Keep in mind, this number could be different from the number of shares your company has actually issued. Your authorized share number is the maximum number of shares your corporation could sell based on your corporate bylaws or charter.

• The franchise tax is due even if the business didn’t conduct any activity or lost money.
• The Delaware Franchise Tax for a corporation is based on your corporation type and the number of authorized shares your company has.
• Let’s also assume the number of shares issued and authorized is the same for simplicity’s sake.
• The revenue generated from the franchise tax is an important source of income for the state and helps to fund essential services and infrastructure projects.
• If your company has authorized 5,000 shares or fewer, your total Delaware franchise tax amount is $175.

The Franchise Tax Department will be available to assist on Saturday, February 26th, by email and chat from 8 am to 4 pm. 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 due date for Delaware franchise tax depends on the type of entity and the fiscal year of the business. For corporations incorporated in Delaware, the due date is March 1st of every year, while for LLCs and LPs, the due date is June 1st of every year. It’s important for businesses to ensure that they file their annual reports and pay their franchise tax on time to avoid penalties and interest charges.

No corporation shall consolidate with its assets the assets of another entity for purposes of this section. Incorporating a business in Delaware comes with certain advantages. These include a business-friendly court system, flexible incorporation rules, and the fact that businesses operating only outside of Delaware don’t have to pay state corporate income tax.

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Keep in mind this franchise tax payment due is for the prior (2021) calendar year. Exempt corporations do not have to pay franchise tax but are still required to file a completed annual report and pay the report filing fee by the Delaware annual report due date. You must file your annual report if your business is a corporation and pay your franchise tax and filing fee by March 1.

Why is data protection important for businesses?

Although it’s probably not your favorite time of the year, you can avoid a future tax-fueled headache by preparing in advance. Different incorporated entities in Delaware have to pay different taxes. Taxes are assessed if the corporation is active at any point during the calendar year, from January 1st to December 31st. 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.

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Or you can go directly to the Delaware Secretary of State franchise tax calculator(s) here. As your Registered Agent, we will send you tax reminders both by mail and email, well in advance of the due date. We offer a tax filing service for a small fee in addition to your Franchise Tax amount. For a discounted rate you can submit your Delaware Franchise Tax payment via our online Franchise Tax form. The online fee will vary depending on when the online payment is submitted.

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Franchise Tax is the fee imposed by the State of Delaware for the right or privilege to own a Delaware company. The 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. This is not the same as your Delaware annual report and will not mention internal company information, such as director or officer details.

When is Delaware Franchise Tax Due?

Overall, Delaware is an ideal place to start and run a business. The state has a low franchise tax rate, a short disclosure period, and a number of other business-friendly policies. Workhy can help you set up a company in Delaware and prepare your franchise tax returns, even if you are not a US resident. Delaware has a low franchise tax and also has no state income tax, which makes it an ideal place to start a business.