Delaware Franchise Tax Calculator

Foreign corporations, those that are formed outside of Delaware, cannot file online. With this type of business, your business income will be distributed to you as the sole proprietor. You will pay tax to the state on that income on your individual state tax return. The tax rate will depend on your overall taxable income that year. LLC/LP’s benefit by only having to pay a $300 flat fee for Franchise Tax (not including any filing fees from a Registered Agent). Although not as common, the Investor Rights Agreement may also make reference to the par value of preferred shares.

• The limited partnership or LP franchise tax is also due on June 1.
• We provide small businesses with a tax filing and bookkeeping solution.
• A corporation with 5,000 authorized shares or less is considered a minimum stock corporation.
• If your business was formed or is located in another state but generates income in Delaware, you may need to pay Delaware taxes.

At any moment, executives or team members may own public or private stock in any of the third party companies we mention. Optional – if you’d like to share anything else to help us prepare for our consultation, please let us know. Grew from a 2-person startup to a NASDAQ listed public company. We set startups up for fundrising success, and know how to work with the top VCs. Becoming a Delaware C-Corp is simple, but there is a lot of legwork.

In addition to paying the franchise tax, businesses incorporated in Delaware must also file an annual report and pay a small filing fee. If the Delaware Franchise Tax calculation uses 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 need to be separately submitted to us by email, fax or mail. 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

So step 1 in the directions below is what you’ll multiply against your total number of shares, then you divide by 400/1,000,000 to get to what you owe. Note that a single additional authorized share will cause this startup to pay an extra $85. There is a $200 penalty for failure to file a complete report by the due date. Also, the Secretary of State will not issue a Certificate of Good Standing for a corporation that owes franchise taxes or a completed report. 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.

Often, the tax is then calculated to the minimum payment of $350, with a $50 annual report fee. If your company falls into the maximum stock option of 5001 or more shares, there are two possible methods to calculate the Delaware franchise tax. The first is the use of virtual mailboxes, which Delaware does not accept because they require a physical address to know where your company is actually operating from. As a last resort, the CEO can list their personal address, but this is not ideal for everyone. 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.

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

If your business was formed or is located in another state but generates income in Delaware, you may need to pay Delaware taxes. If you own a business that operates in multiple states, you will greatly benefit from the knowledge of a tax professional. Multistate taxes and determining nexus can be very complicated. This means that if you receive a high bill that was calculated under the first method, you can request a recalculation using the second method. Delaware franchise tax is a tax charged by the state of Delaware for the right to own a Delaware company.

CT Corporation

The Delaware Franchise 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. Whether your business is physically in Delaware or not, you don’t pay any state taxes. The limited partnership or LP franchise tax is also due on June 1. This is the first method that is typically used to calculate tax. Payment can be submitted with an electronic check or credit card.

What are Delaware franchise taxes?

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. You must file your annual report if your business is a corporation and pay your franchise tax and filing fee by March 1.

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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. If you’ve authorized 5,001 to 10,000 shares, your franchise tax is $250.

They mail your official business address an annual reminder to pay your franchise taxes. A tax haven or shelter is a method of reducing taxable income which results in a reduction the accrual basis of accounting of tax payment. The method is any that recovers more than $1 in tax for ever $1 spent within a four-year period. A tax shelter can be created by an individual or a corporation.

Delaware Franchise Tax: How to Calculate and Pay

The HBS Blog offers insight on Delaware corporations and LLCs as well as information about entrepreneurs, startups and general business topics. This is not the same as your Delaware annual report and will not mention internal company information, such as director or officer details. Yes, regardless of your Delaware company activity or not conducting business, you are still required to pay the Delaware Franchise Tax to remain in Good Standing. If your company is no longer active and you wish to close your business, be sure to follow the proper steps to Dissolve a Corporation, or Cancel an LLC. The methods of calculating Delaware Franchise Tax are detailed below. Read on to find out how much you’ll pay, or visit our Delaware Franchise Tax calculator app for a quick answer.