contact-icon
Delaware Annual Franchise Tax Report

What is Delaware Annual Franchise Tax Report And How It is calculated?

Introduction

If you own a business registered in Delaware, you may need to file the Delaware Annual Franchise Tax Report. Delaware is a popular place for businesses because of its friendly laws, but companies must follow tax rules to stay in good standing. This guide explains what the Delaware Annual Franchise Tax Report is, who needs to file it, deadlines, and what happens if you don’t file.

What Is the Delaware Annual Franchise Tax Report?

The Delaware Annual Franchise Tax Report is a required filing for businesses in Delaware. It helps the state keep track of businesses and makes sure they pay the franchise tax. This tax is not based on company earnings but on the company’s structure, like the number of shares it has.

Who Needs to File Delaware Franchise Tax?

The report is required for:

  • Corporations: All Delaware corporations must file the report and pay the tax.
  • LLCs and Partnerships: These businesses don’t need to file a report but must pay an annual tax.
  • Nonprofits: They must file a report but don’t have to pay the tax.

Why Delaware Charges This Tax?

Delaware has over 1.8 million active businesses more than its population because it offers a business friendly environment. This includes the Court of Chancery and flexible corporate laws. The state charges a franchise tax to support these benefits. This tax isn’t based on income (since Delaware doesn’t tax corporate income for businesses operating outside the state) but on the privilege of being incorporated there.

Deadlines and Fees

The filing deadlines and fees depend on the type of business:

  • Corporations: The report and tax are due by March 1st each year. The minimum tax is $175, but some companies pay more based on their share structure.
  • LLCs and Partnerships: They must pay $300 by June 1st each year.
  • Nonprofits: Their report is due by March 1st, with a small $25 fee.

We offer fast and accurate Delaware Annual Report filing services, ensuring compliance and timely submission for your business.

How Is the Delaware Franchise Tax Calculated?

Corporations can calculate their franchise tax in two ways:

  • Authorized Shares Method: The tax is based on how many shares the company is allowed to have.
  • Assumed Par Value Capital Method: This method considers both company assets and shares and may result in a lower tax.

Penalties for Late Filing Delaware Franchise Tax

If you don’t file the report or pay the tax on time:

  • You will be charged a $200 late fee.
  • Interest will be added at 1.5% per month on unpaid taxes.
  • Your business may lose its good standing, which could cause problems and even lead to closure.

How to File Delaware Franchise Tax?

You can file your report and pay the tax online through the Delaware Division of Corporations website. The steps are:

  • Log into the Delaware Division of Corporations’ website.
  • Enter your business details, like your entity number.
  • Choose how you want to calculate the tax (for corporations).
  • Pay the tax with a credit card or electronic check.

Why It Matters?

Delaware is a popular place to start a business because of its friendly laws and tax benefits. However, not filing the Delaware annual franchise tax report on time can cause problems. Businesses may face late fees, interest charges, or even lose their good standing, which can affect operations, financing, and legal protections.

Exemptions and Special Cases

  • Nonprofits: Tax exempt groups like 501(c)(3) organizations don’t have to pay, but they still need to file a report.
  • New Corporations: If you start your business after March 1, you don’t have to pay tax for the first year, but you will in the future.
  • Inactive Businesses: Even if your company isn’t active, you still have to pay the minimum tax unless you officially close it.

Tips for Compliance

  • Use Technology: Set calendar alerts or use software to track deadlines.
  • Check Records: Make sure your share and asset numbers are correct to avoid tax issues.
  • Hire a Registered Agent: They can handle filings and send reminders to save you time.
  • Close Inactive Companies: If your Delaware company isn’t active, officially close it to stop tax charges.

Conclusion

Filing the Delaware Annual Franchise Tax Report is important for keeping your business in good standing. Knowing the deadlines and fees can help you avoid extra costs and penalties. If you’re unsure how to file, consider talking to a tax expert or lawyer for help.

Suggested Read :

Delaware Annual Filing by Indian

LLC vs INC

Taxation rules for LLC

LLC Operating Agreement in USA

Article of Organization of LLC Company

FAQ

1. Who needs to file the Delaware Annual Franchise Tax Report?

All Delaware corporations must file the report and pay the tax. LLCs and partnerships don’t need to file the report but must pay a tax. Nonprofits must file the report but don’t have to pay the tax.

2. What happens if I don’t file the Delaware Annual Franchise Tax Report on time?

If you miss the deadline, you’ll be charged a $200 late fee, plus 1.5% interest per month on the unpaid tax. If you keep ignoring it, your business could lose its good standing, making it harder to operate

3. How is the Delaware Franchise Tax calculated?

Corporations have two ways to calculate their tax:

  • Authorized Shares Method: Based on how many shares the company has.
  • Assumed Par Value Capital Method: Based on company assets and shares, which may lower the tax.

LLCs and partnerships have a fixed tax of $300 per year.

4. How do I file the Delaware Annual Franchise Tax Report?

You can file online on the Delaware Division of Corporations website. Just log in, enter your business details, choose how to calculate the tax (if you’re a corporation), and pay with a credit card or e-check.

5. What is the deadline for paying the Delaware Franchise Tax?

The deadline depends on your business type:

  • Corporations: March 1st.
  • LLCs and Partnerships: June 1st.
  • Nonprofits: March 1st (only need to file the report, no tax required).

Interesting Facts

Types of Corporate Meetings in Company Law
OPC vs Pvt Ltd company
criteria for Designated Partner in LLP
Criteria to Establish a Pvt Ltd Company
why OPC is Best for Solo Entrepreneurs?
View all stories

POPULAR ARTICLES

RECENT ARTICLES

BROWSE BY TOPICS

About Ebizfiling -

EbizFiling is a concept that emerged with the progressive and intellectual mindset of like-minded people. It aims at delivering the end-to-end corporate legal services 0f incorporation, compliance, advisory, and management consultancy services to clients in India and abroad in all the best possible ways.
 
To know more about our services and for a free consultation, get in touch with our team on  info@ebizfiling.com or call 9643203209.
 
Ebizfiling

Author: team-ebizfiling

The team Ebizfiling believes in providing well researched, truest and verified information to its clients and readers. The team works continuously towards enhancing Ebizfiling.com to make it a no. one platform not only for providing the best services but also for providing information to everyone through the website.

Follow Author

Leave a Reply

Your email address will not be published. Required fields are marked *

Hi, Welcome to EbizFiling!

Hello there!!! Let us know if you have any Questions.

Thank you for your message.

whatsapp Call Now Button
Types of Corporate Meetings in Company Law OPC vs Pvt Ltd company criteria for Designated Partner in LLP Criteria to Establish a Pvt Ltd Company why OPC is Best for Solo Entrepreneurs?