Delaware franchise tax is an annual tax that businesses incorporated in the state of Delaware must pay. The tax is important to note that the Delaware franchise tax is not the same as the state’s corporate income tax. It’s important to note that the Delaware Franchise Tax is different from the state’s corporate income tax. The corporate income tax is based on the net income of the business, while the franchise tax is a fee that is charged regardless of the company’s profitability.

• A franchise tax, sometimes called a privilege tax, is a fee you pay for the privilege of doing business in a certain state.
• You will also be charged a 1.5 percent monthly interest on the amount due.
• Rather, it is a tax on the value of a company’s authorized shares or its total gross assets in the state of Delaware.
• Delaware charges a state processing fee of $50 making your total tax payable as $450.
• In this article, we’ll provide you with a step-by-step guide on how to pay Delaware franchise tax.

A corporation with 5,000 authorized shares or less is considered a minimum stock corporation. A corporation with 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 $200,000 per year, as illustrated below. The Delaware annual report fee is $50 and the tax is $175 for a total of $225 due per year. These large corporate filers pay an annual franchise tax of $250,000 instead of $200,000 and are required to pay their franchise taxes on a quarterly basis. Certain exempt domestic corporations like charities, civic organizations and religious organizations do not have to pay the franchise tax.

The Assumed Par Value Capital method

Every for-profit corporation incorporated in Delaware is subject to the annual franchise-tax requirement. The corporation does not have to be doing business in Delaware or earn any income there. A tax haven or shelter is a method of reducing taxable income which results in a reduction of tax payment. The method is any that recovers more than $1 in tax for ever $1 spent within a four-year period. If the tax is not paid on or before June 1, a late fee of $200 and a monthly interest of 1.5 percent will be charged.

All registered corporations are required to pay taxes and file their annual reports before the 1st of March. Before paying your franchise tax, you need to file your annual report with the Delaware Division of Corporations. This report is due on March 1st, the same day as the franchise tax payment. The annual report provides updated information about your corporation, such as the names and addresses of officers and directors, registered agent information, and the number of authorized shares.

• Additionally, the franchise tax is due on an annual basis, while the corporate income tax is typically paid quarterly.
• Both the Delaware annual report and the Delaware franchise tax are due by March 1 each year.
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A professional registered agent company can assist with identifying total taxes due on any given date when you are handling a merger or dissolution. It is important to note that Delaware will not issue Good Standing Certificates for corporations that have not met the annual report filing requirements. To help your Delaware corporation annual report filing process go smoothly, we’ve got some answers to the most frequently asked questions we receive this time of year. If you’ve authorized 5,001 to 10,000 shares, your franchise tax is $250. If your company has authorized 5,000 shares or fewer, your total Delaware franchise tax amount is $175.

For limited liability companies (LLCs), limited partnerships, and other business entities, the tax is calculated based on the company’s total assets located in Delaware. The assets include tangible and intangible property, such as real estate, equipment, and intellectual property. The tax rate is based on a sliding scale that increases as the company’s total assets increase. The maximum amount of tax due for LLCs and other entities was $200,000 in 2021. The total cost of the corporation’s Delaware Franchise Tax consists of an annual report fee and the actual tax due. Note that only one Delaware annual report is required to be filed by March 1st, even for corporations paying quarterly franchise taxes.

Step 2: File Annual Report

You probably already know that most Americans have to file their 2018 federal tax return by April 15, 2019 (as we told you earlier). For most states with an income tax (there are nine states with no income tax), the state return is also due on April 15 this year. However, some states give you more time to file — such as Delaware. Paying your Delaware franchise tax is an important requirement for all corporations incorporated in the state. By following the steps outlined in this article, you can ensure that you pay your tax on time and avoid any penalties or interest charges. The deadline for paying the Delaware Franchise Tax is March 1st of each year.

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Delaware is one of the most preferred states by entrepreneurs who want to establish a company in the US. The state of Delaware offers many benefits for small business owners, including a favorable tax environment. The franchise tax is the only tax that anyone who wants to start a business in Delaware must pay. In this article, you can find all the information you need to know about the Delaware franchise tax. The annual franchise tax is required and paid to the state of Delaware. By not requiring more information, businesses that file their franchise tax in Delaware can maintain privacy.

What are Delaware franchise taxes?

We’ll cover topics such as the tax due date, the amount of tax to be paid, how to file your annual report, and the various payment methods available. We’ll also provide you with fob shipping point vs fob destination tips on how to ensure that you pay your tax on time and avoid any penalties or interest charges. The payment of franchise taxes for DE corporations is a little more complicated.

Delaware Franchise Tax: Everything You Need to Know

However, if that’s not possible, having an extra two weeks to file your Delaware return can help. It gives you more time to focus on getting your federal return off before the April 15 deadline and then to get your state return just right. If you can’t file on time, you can get an extension to October 15, 2019, by submitting Delaware Form 200ES (1027) and paying any tax estimated to be due for the 2018 tax year no later than April 30, 2019.

How do I pay my franchise taxes and file the annual report?

Owners of multiple corporations will need to pay Delaware Franchise Tax for each entity separately as each entity is required to file an annual report. A non-stock/non-profit company is considered exempt by the State of Delaware. This type of company does not pay the standard annual Delaware Franchise Tax, but must still file and pay the annual report fee of $25 per year. While a 2021 calculator is not posted on the Delaware Secretary of State site, we have confirmed that the 2018 calculator can be used for the 2021 tax year.