The entity’s file number, available through the Delaware.gov website or from your Delaware registered agent, is required when submitting your tax and report. Delaware Franchise Tax calculations are prorated if a corporation’s authorized and/or issued shares change during the year. Under this method, your franchise tax is based why petty cash is important to small businesses on how many shares your corporation has authorized. The Delaware franchise tax is collected every year by the Delaware Department of State.

Who has to pay the franchise tax?

Each method takes into account different aspects of a corporation’s structure and assets. The Delaware franchise tax is a mandatory fee, not based on corporate income but on the privilege of being a Delaware-incorporated entity. This franchise tax fee what’s the difference between salary vs wage employees varies depending on the chosen calculation method — the Authorized Shares Method or the Assumed Par Value Capital Method. You’ll incur a $200 penalty if you don’t file an annual report on or before March 1. You’ll also pay 1.5% per month applied against any unpaid tax and penalty. If you are a startup that has chosen Delaware as its state of incorporation, you are likely aware that you are subject to Delaware franchise tax.

Method #1: Authorized Share Method (default method)

They mail your official business address an annual reminder to pay your franchise taxes. Most startups use the Assumed Par Value Capital Method to calculate their franchise tax bill. This method almost always results in a lower tax for our customers because startups generally have few assets but authorize millions of shares. The Delaware annual report includes information about the registered agent, principal business location, directors, and officers, ensuring transparency and up-to-date records with the state.

1. If you’re trying to figure out if you owe Delaware franchise tax, Bench can help.
2. Form 1120 Schedule L for tax year ending prior to filing the Delaware franchise tax report.
3. A refund might be available if the Assumed Par Value Capital Method was not considered.
4. This method calculates the tax based on your corporation’s total gross assets and the ratio of issued shares to authorized shares.
5. It is a requirement that all Delaware corporations file an annual report.

Technology and life sciences companies that choose to incorporate in Delaware must pay an annual franchise tax. Keep in mind, this number could be different from the number of shares your company has actually issued. Your authorized share number is the maximum number of shares your corporation could sell based on your corporate bylaws or charter. You’ll need to know your corporation’s gross assets and authorized shares.

Enter Mosey, the modern solution to Delaware’s corporate compliance demands. Mosey works to revolutionize franchise tax payments and annual report filings, making the process much simpler. Whether you’re a domestic corporation or a foreign entity doing business in Delaware, understanding and adhering to these obligations is paramount. The franchise tax isn’t a measure of income but a fee for the privilege of incorporating and operating under Delaware’s advantageous legal framework. If you’re ready to transform your compliance experience, turn what is a 12 month rolling forecast to Mosey for an efficient, accurate approach to meeting your Delaware franchise tax and annual report obligations. Book a demo today to learn more and take the first step toward streamlined compliance.

Large Corporate Filer

Unlike for- or non-profit corporations, limited liability companies, limited partnerships, and general partnerships formed in Delaware do not file an annual report. They are, however, required to pay an annual flat fee of $300.00, with taxes due by June 1st of each year. A fine of $200.00 is imposed for non-payment or late payment, with an interest rate of 1.5% per month applied to the outstanding balance. All Delaware-incorporated businesses must, however, still pay the annual franchise tax, submit an annual report, and pay a filing fee.

Available on the Delaware.gov website, this digital platform allows corporations to submit their reports efficiently, pay taxes, and even receive immediate confirmation of submission and payment. Every for-profit corporation incorporated in Delaware, irrespective of whether they actively conduct business in the state or not, must comply with the franchise tax and annual report filing. In Delaware, the franchise tax and annual report requirements cast a wide net, encompassing a diverse array of business entities. Understanding who falls under this compliance umbrella is crucial for maintaining legal and operational integrity. The minimum franchise tax is $175.00 for corporations using the Authorized Shares Method and $400.00 for corporations using the Assumed Par Value Capital Method.

In fact, a significant number of businesses, including over 60 percent of Fortune 500 companies, choose Delaware as their legal home. For these reasons, more than a million businesses are incorporated in Delaware, including more than half of all publicly traded and Fortune 500 companies. Filing this report is not just a matter of regulatory compliance — it’s a reaffirmation of your business’s commitment to corporate governance and operational clarity. Each year the State of Delaware calculates your corporation’s franchise tax obligation based on the Authorized Share Method. The above calculations must be done for each class of stock that is authorized by a corporation.

For corporations using the Assumed Par Value Capital Method, the minimum franchise tax is $350 and the maximum tax is $200,000; however, for the 2018 tax year, the minimum will increase to $400. It’s important to note that the Delaware franchise tax is distinctly different from an income tax. While income tax is levied on earnings, the franchise tax is a fee for the benefits and privileges of incorporation in Delaware.

This is a person or a representative that is physically located in Delaware. If a company doesn’t have a physical presence in Delaware, there are professional registered agents available for hire; prices and levels of service vary. “EisnerAmper” is the brand name under which EisnerAmper LLP and Eisner Advisory Group LLC and its subsidiary entities provide professional services. Eisner Advisory Group LLC and its subsidiary entities are not licensed CPA firms.