Your Effective Date Affects Your Franchise Tax

Delaware Franchise Tax

Are you ready to form your Delaware Corporation, Delaware LLC, or Delaware Limited Partnership for your new business and need a Delaware Registered Agent? Great. That’s why we’re here!  At Harvard Business Services, Inc., we make the process seamless. 

Traditionally, the first step is deciding when the time is right for your company. The birthday of your brand-new company. When it is close to the end of the year, you have a decision to make in regards to when you file the Certificate of Formation, Certificate of Incorporation, or Certificate of Limited Partnership with the Delaware Division of Corporations. Why does it matter? Because your company’s inception date effects when the franchise tax is due.

If you file your company with the Delaware Division of Corporations in November or December of the 2021 calendar year, with an effective date in 2022, your Delaware franchise tax is due starting in 2023. The franchise tax and annual report is due March 1st each year for Delaware Corporations. These are due June 1st for Delaware LLCs and Limited Partnerships.

A little known secret about incorporating a company with the Delaware Secretary of State Division of Corporations is that you can file your documents starting in early November and designate the effective date of filing as January 1st, 2021.  This is accomplished by adding an Article to the certificate. Essentially, you file now, but pay later. This comes in handy if you’re on a tight budget, which is common in early stages. It is also useful, if you see an upcoming investment opportunity, but are not certain how soon your new company is needed.  We can file for you so that your business becomes effective January 1st, 2022, and your franchise tax is not due until 2023.

Please note: this strategy only applies for new company filings, not existing companies.

If you’re ready to get the ball rolling on your new Delaware Corporation or LLC please reach out to Harvard Business Services, Inc. today.  Our friendly staff is here for you.  You can call us at 1-800-345-2677 ext. 6133 or you can reach us via email at sales@delawareinc.com if you prefer.  We’re ready to help!

*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.

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There are 4 comments left for Your Effective Date Affects Your Franchise Tax

Craig Sinclair said: Monday, May 17, 2021

Thank you for your article. I have one small technical problem that you could possibly advise on. I open an LLC in Delaware on 10/15/2020. I was not able to open a bank account as I am not doing business in the USA, however, I am unable to do business in the USA until I have a bank account. My question is as follows. I have done NO TRANSACTIONS IN THE LLC. But I owe $300 Franchise tax. What is the period between annual franchise fees? I ask because it's not even a year and I am now told I owe another $300 for 2021. I want to dissolve the LLC but now have to pay $600 franchise taxes and $204 to dissolve the LLC. Please could you assist with the periods? Can I trust the Delaware gov for accurate info? Thanking you in advance. Kind Regards Craig

HBS Staff replied: Monday, May 17, 2021

Hello Craig,

Thank you for reading our article. When looking to open a U.S. Bank Account the bank wants you to appear in-person, we are happy to provide documents the bank should require. The Franchise Tax is due every year on June 1 whether you make any money or not. It is simply the price you pay for the right or privlege to own a Delaware company. The State of Delaware works in arrears. So since you formed your company in 2020 you are required to pay the 2020 annual Franchise Tax by June 1. We are happy to assist in providing a quote to close the business as well.

Julia David said: Saturday, February 13, 2021

Such awesome content to follow. Keep the good work up.

HBS Staff replied: Monday, February 15, 2021

Hi Julia,

Thank you for you reading our article. We are glad to hear you found this article helpful. We are here to assist with any questions.

Charu said: Monday, February 10, 2020

How many months grace period possible?

HBS Staff replied: Monday, February 10, 2020

Regarding the due date for your franchise tax, the state of Delaware generally does not offer any grace period. If you miss the deadline, you immediately begin incurring penalties. Here's some additional information about Franchise Tax payments: https://www.delawareinc.com/blog/top-10-corporation-llc-franchise-tax-questions/

Nancy Nudel said: Wednesday, November 6, 2019

Can we still get an EIN number now , if the effective date of the new company will be 01/01/2020?

HBS Staff replied: Wednesday, November 6, 2019

Yes, you can obtain your EIN even if your effective date is not until the new year.

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