9 Common Franchise Tax Filing Mistakes

common franchise tax filing mistakes

Franchise Tax season is a busy time at Harvard Business Services. While processing filings, we've noticed a few consistent Franchise Tax mistakes that continually pop up. Be aware of the mistakes other customers have made and make sure you don't do the same, whether filing your taxes through us or directly with the state.

Keep these common mistakes in mind:

  1. Waiting until the last minute to pay your Franchise Tax.
    If you're one of the one million Delaware companies that believe they can log on to the state’s website four hours before the deadline and pay via PayPal, think again. Our advice: Pay your Delaware Franchise Tax early and use a credit card if going through the state's website.
  2. Not having a credit card.
    The state accepts MasterCard, Visa and American Express. If you don’t have a credit card, don’t bother calling them. Just mail your tax form with a check.

    If you choose to pay your tax using our website, we do accept Paypal payments.
  3. Not filling out the form
    We're not kidding--some people send it back blank. Some people write "Same as last year" across it. The state of Delaware does not accept this; you must fill out the form and answer every question.
  4. Not listing your (correct) address
    A physical street address, not a P.O. box or your Registered Agent's address, must be listed on the annual report.
  5. Failure to provide director information
    This is neccessary and required information. For corporations, all directors must be listed on the annual report, along with their addresses (again, no P.O. boxes please!). The company may opt to list the Directors' personal addresses or business addresses. LLCs and LPs do not have to list member/partner information.
  6. Not checking the box for officer title
    Only one corporate officer (if the company has officers) is required to be listed. It is important to specify the position of this officer (e.g. President, CEO, CFO, Secretary, etc.).
  7. Not signing where indicated
    Neither Harvard Business Services nor the state of Delaware will accept an unsigned form, due to official regulations.
  8. Failure to have your company’s state file number.
    The state does not have the name and address information for your company, nor does it have a contact person for your company. In Delaware, the Registerd Agent maintains the contact person’s information. Therefore, the state cannot verify your payment will be credited to the correct company if you happen to select the wrong company--one with a very similar name to yours--when you pay the Franchise Tax. (This happens more than you might think.)

    A mistake like this will take time to sort out and, during that time, you may not be able to get a Certificate of Good Standing should you need one.
  9. Making the check out to the wrong party
    When paying your Franchise Tax through Harvard Business Services, Inc., you are paying for the Franchise Tax, as the state requires, and you are also paying Harvard Business Services, Inc. a service fee. You also have the option of paying your annual Registered Agent Fee along with the Franchise Tax. If you make the check out directly to the state, we cannot pay your tax electronically and we will return your check (within three business days) by regular mail.

    Likewise, if you are paying directly through the state and sending them a check, it must be made out to the State of Delaware and not Harvard Business Services, Inc., even if we are your Registered Agent.

Why to use Harvard Business Services to file your annual Franchise Tax:

At this point, you may be wondering what the benefits are of filing through us as opposed to filing with the state directly.

When you file online with Harvard Business Services, Inc., you can’t make a mistake--we are here to make sure of that. Our user-friendly form allows us to obtain every piece of information we need to know in order to submit your tax filing to the state of Delaware. In fact, with payment by credit card or PayPal, we can absolutely guarantee that your Delaware Franchise Tax will be paid before the tax deadline, and absolutely no Franchise Tax errors will occur.

Our guarantee means that if you’re charged a late penalty by the state of Delaware for any reason, Harvard Business Services, Inc. will pay it for you, at our expense. (The late fee for a corporation is $200; the late fee for an LLC is $200 as well, but you will  never pay a late fee if you depend on Harvard Business Services, Inc. to pay your Franchise Tax for you.)

Consider these two scenarios:

  1. Ike owns numerous Delaware business entities. He decides to file his Franchise Tax fees directly with the Division of Corporation’s Franchise Tax Department. He mails several different checks to cover the Franchise Tax fees for all his separate entities. Unfortunately, the transaction does not go smoothly.

    The state indicates there is a prior balance on some of his entities while other entities show a credit on the accounts. Ike is positive he paid Franchise Tax on all of his entities correctly, but that is not what is on record with the state’s Franchise Tax Department.

    The discrepancies can be traced back a couple of years, which means there is a lot of research to investigate. Now Ike has to spend his valuable time searching through cancelled checks, bank statements and entity records to figure out what happened. In the meantime, some of his business entities are imposed additional late penalties as well as interest fees. Now the situation is worse and Ike is even more frustrated.
  2. Sam also owns several business entities registered in the state of Delaware. He doesn’t want to deal with the hassle of filing his Franchise Tax reports himself, so he lets us take care of everything for him. Sam receives email confirmations for all his Franchise Tax transactions, so he knows exactly when the process is complete.

    A few months later, during a routine audit for a specific entity, Sam is required to provide receipts for all his past Franchise Tax filings. He contacts Harvard Business Services, Inc. and instantly obtains all the necessary copies of the requested documentation. Sam doesn’t have to worry about searching through old records to find what he needs, nor does he have to waste any of his time. We are able to quickly do all the work for him, saving him time, aggravation and money.

The moral of this Franchise Tax story is: Don’t be like Ike. Let Harvard Business Services, Inc. take care of your business entity’s annual Franchise Tax filing so you can focus on more important business matters.

For assistance with filing your Delaware annual Franchise Tax, please feel free to call, email or live chat with us. We're happy 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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