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What is Delaware Franchise Tax?

 

 

Whether you are looking for information on the Delaware Franchise Tax or you are ready to pay your tax,we offer you the tools to make the process as simple as possible.

 

If you're ready to file and pay your Delaware Franchise Tax now, please visit our easy-to-use online Franchise Tax payment form. If you need more details, we have created this informational page for you. 

What Is Delaware Franchise Tax?

The 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.

 

The term "Franchise Tax" does not imply that your company is a franchise business. 

When Is It Due?

The due date of your tax varies, depending on your company type.

 

The Franchise Tax for a corporation is due by March 1 of every year. If the tax is not paid on or before March 1, the state imposes a $125 late penalty, plus a monthly interest fee of 1.5 percent.

 

The Franchise Tax for a Delaware LLC is due by June 1 of every year. 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 percent.

 

Corporations, LLCs and LPs are taxed in arrears, meaning the tax due by each due date is for the previous calendar year.

How Do I Calculate My Franchise Tax?

The Franchise Tax for a Delaware limited liability company (LLC) or Delaware limited partnership (LP) is a flat annual rate of $300 as of July 1, 2014.

 

The Franchise Tax for a corporation is a little more complicated. It is based on your corporation type and the number of authorized shares your company has. The total cost of the Franchise Tax is comprised of an annual report fee and the actual tax due.

 

A non-stock/non-profit company is considered exempt with the state of Delaware. This type of company does not pay the annual tax but must file and pay the annual report fee. The annual report fee is $25 per year.

 

A corporation having 5,000 authorized shares or less is considered a minimum stock corporation. The annual report fee is $50 and the tax is $175 as of July 1, 2014, for a total of $225 per year.

 

A corporation having 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 $180,000 per year.

 

There are two methods to calculate a maximum stock company's Franchise Tax. They are:

The Authorized Shares Method

 

The state of Delaware uses this method to initially calculate your taxes. This method is calculated based on the number of authorized shares. The calculation is as follows:

  • 5,000 shares or less: $175 (as of July 1, 2014)
  • 5,001 - 10,000 shares: $250 (as of July 1, 2014)
  • Additional 10,000 shares or portion thereof: add $75
  • The maximum annual tax is $180,000

 

Don't forget to add the $50 annual report fee to the Franchise Tax after it is calculated.

 

The Assumed Par Value Capital Method

The state of Delaware allows you to pay the lower of the two calculation methods. Therefore, if you receive a bill from Delaware for tens of thousands of dollars, it may be in your best interest to try calculating your Franchise Tax with the assumed par value capital method.

 

In order to utilize this filing method, you will need to provide the company's total gross assets (as reported on the Form 1120, Schedule L) and the total number of issued shares. Many times the tax is then calculated to the minimum payment of $350 Franchise Tax plus the $50 annual report fee.

 

The calculation used for this method is more complex. Please contact our office if you would like a copy of the calculation emailed to you. We will be happy to help you with this calculation.

How Do I Pay My Franchise Tax?

We make it easy to pay your Franchise Tax online.

 

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 of $49 plus your Franchise Tax. We also offer an online discounted filing fee that ranges from $29 to $59, depending on when the online payment is submitted.

 

Payments can be submitted via our online Franchise Tax payment form.

 

You can also email or fax (302- 645-1280) us your LLC/LP Franchise Tax worksheet or your corporation Franchise Tax worksheet. If you would like to make your payment by phone, call us at 800-345-2677, Ext. 6904.

 

 

 

Delaware Franchise Tax

 

Do I Need to Submit Anything Else With My Payment?

Yes. Corporations must complete an annual report along with their Franchise Tax payment. This report must list the company's physical address (not a P.O. box and not your Registered Agent's address); the name and physical address of at least one director; and, if there are any officers, the name, title and physical address of one of the officers.

 

If the tax is being calculated with 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 then need to be separately submitted to us by email, fax or mail.

Is My Franchise Tax the Same As My Annual Registered Agent Fee?

The Delaware Franchise Tax and the Registered Agent Fee are two separate, unrelated fees. The annual Franchise Tax is imposed by the state of Delaware. The annual Registered Agent Fee is paid to Harvard Business Services, Inc. to act as an agent for your entity in the state .

 

Our annual Registered Agent Fee is $50 per year, and is due on the anniversary month of the formation of your company.  It is the lowest Registered Agent fee in the industry, and it is guaranteed to remain fixed at $50 per year, as long as the fee is paid on time and your company remains in good standing with the state of Delaware.

 

Learn more about the Delaware Franchise Tax in this short video:

 

 

What Do I Do After Paying My Franchise Tax?

After paying Franchise Tax, many business owners require a Delaware Certificate of Good Standing.

 

A Certificate of Good Standing is a document sent directly from the Delaware Secretary of State certifying the date the company was formed in the state of Delaware, that the company is current with all Delaware taxes and that the company is in good standing.

 

This is not the same as your annual report and will not mention internal company information, such as director or officer details.

 

We can assist you in obtaining this document. To purchase a Certificate of Good Standing, please visit our Good Standing order page.

 

If you have any additional questions or concerns about the Delaware Franchise Tax, please feel free to call 1-800-345-2677, Ext. 6904 or email us.

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