It’s that time of year again. The football season is underway. School is in full swing. Pumpkin spice is everywhere. Halloween has come and gone, and Thanksgiving is just around the corner. We are already seeing Christmas ads!
It’s also that time of year when the Delaware Division of Corporations allows new formations (LLCs, LPs and corporations) to choose January 1, 2018 as their effective filing date. What does this mean and why is it a big deal?
When a new Delaware LLC’s Certificate of Formation is filed with the Delaware Secretary of State, the owner of that LLC is committed to paying Franchise Tax the following year (as well as for the life of the company). The Franchise Tax cycle starts immediately. The same can be said for a Delaware Limited Partnership’s Certificate of Limited Partnership and a Delaware corporation’s Certificate of Incorporation.
However, if you file your new Delaware company between now and December 31, 2017, and choose January 1, 2018 as your Effective Date, you won’t have to pay Franchise Tax until June 1 of 2019. You can choose January 1, 2018 as the effective date for a new LP or corporation as well. Corporation Franchise Tax will not be due until March of 2019.
When the Certificate of Formation is filed with the state of Delaware, we add an extra article that says, “The limited liability company will have a future effective date of January 1, 2018.” This allows for the LLC to receive the effective date of Jan 1, 2018. When we file the Certificate of Incorporation with the state of Delaware, we add an extra article that reads, "The corporation will have a future effective date of January 1, 2018."
There are additional benefits of choosing January 1, 2018 as your Effective Date. You have some time to prepare for the launch of your startup; then, on the first day of the new year, your new company will be ready to conquer the world.
Fun fact: only Delaware entities that take advantage of this early-to-file opportunity will have their incorporation date as January 1. This is because filing dates must occur when the Delaware Secretary of State’s office is open, and it is never open on January 1. In addition to all the other reasons to file early with an effective date of January 1, you can be one of few entities with the unique incorporation date of January 1.
Please call us at 1-800-345-2677 to file a new Delaware company with an effective date of January 1, 2018. If you file with us online, the company will be formed immediately, so be sure to call us.
A different version of this blog was originally published on Friday, December 14, 2016.
*Disclaimer*: Harvard Business Services, Inc. is neither a law firm nor an accounting firm and, even in cases where the author is an attorney, or a tax professional, nothing in this article constitutes legal or tax advice. This article provides general commentary on, and analysis of, the subject addressed. We strongly advise that you consult an attorney or tax professional to receive legal or tax guidance tailored to your specific circumstances. Any action taken or not taken based on this article is at your own risk. If an article cites or provides a link to third-party sources or websites, Harvard Business Services, Inc. is not responsible for and makes no representations regarding such source’s content or accuracy. Opinions expressed in this article do not necessarily reflect those of Harvard Business Services, Inc.
There is 1 comment left for A New Company for a New YearSAMUEL H LEE said: Monday, November 20, 2017
I want to setup one new corporation effecitive 01/01/2018. Please tell me what you want from me. Samuel H. LeeHBS Staff replied: Tuesday, November 21, 2017
Please call us during normal business hours (9-5 ET) so we may assist you in starting your new company. 1-800-345-2677. Or you can live chat with us via our homepage.