de franchise tax faq

Delaware Franchise Tax FAQ

• What Is Delaware Franchise Tax?
• When Is The Delaware Franchise Tax Due Date?
• How Do I Calculate My Delaware Franchise Tax?
• How Do I Pay My Delaware Franchise Tax?
• What If I Have Multiple Businesses?
• Do I Need to Submit Anything Else With My Delaware Franchise Tax Payment?
• Is My Delaware Franchise Tax the Same As My Annual Registered Agent Fee?

Full Answer

How much is Delaware franchise tax?

The minimum Delaware franchise tax fee is $175 with a $50 filing fee. The minimum Delaware franchise tax and annual report payment is $225 for domestic corporations. The Delaware franchise tax for this business is simple. It is a flat fee of $30 due on June 1. The Delaware franchise tax for a corporation is slightly more complicated.

Do I have to pay Delaware franchise tax?

In the state of Delaware, most companies and corporations that are incorporated in the state are legally required to pay an annual franchise tax. This tax pays for the privilege of being incorporated in the state, even if the company does business elsewhere. The Delaware Department of State, Division of Corporations, administers the franchise tax program.

Is Delaware a franchise tax?

In Delaware, the franchise tax is a “privilege fee,” which allows an entity to maintain its good-standing status in Delaware. This is a separate and distinct tax and has no bearing on an entity’s income or operations. Payment of the franchise tax on time and in the correct amount is important to maintain good-standing status in Delaware.

Why does Delaware have no sales tax?

There is no sales tax in Delaware. It doesn't matter if a company's physical location is in the state or not; as a Delaware corporation, no in-state purchases are subject to tax. Additionally, there is no state corporate income tax on goods and services provided by Delaware corporations operating outside of Delaware. 1 

How do Delaware franchise taxes work?

If your company has authorized 5,000 shares or fewer, your total Delaware franchise tax amount is $175. If you've authorized 5,001 to 10,000 shares, your franchise tax is $250. For every** additional 10,000 shares** authorized after that, you pay another $85 in franchise tax, up to a maximum of $200,000.

How do I avoid franchise tax in Delaware?

There are ways to reduce your Delaware franchise costs in certain circumstances. To reduce the taxes paid by a startup, use the Assumed Par Value method. This method calculates the taxes by total assets. As long as your issued shares constitute a third to half of your authorized shares, this method will save you money.

Do I have to pay Delaware franchise tax?

Any corporation that is incorporated in Delaware (regardless of where you conduct business) must file an Annual Franchise Tax Report and pay Franchise Tax for the privilege of incorporating in Delaware. Franchise Taxes and annual Reports are due no later than March 1st of each year.

What happens if I don't pay Delaware franchise tax?

If you don't pay the Delaware Franchise Tax and file the Annual Report for two straight years, the State of Delaware will administratively dissolve the Corporation. If you have any questions about forming your new Delaware LLC, LP, or Corporation, give us a call today.

What is the Delaware tax loophole?

Companies and wealthy individuals can use Delaware to avoid paying some taxes in other states. So there's a thing called the Delaware Loophole, which essentially enables companies to avoid paying state corporate income tax where they earn the revenue.

How much is franchise tax for LLC in Delaware?

$300.00LLC/Partnership Tax Information All Domestic and Foreign Limited Liability Companies, Limited Partnerships, and General Partnerships formed or registered in Delaware are required to pay an annual tax of $300.00. There is no requirement to file an Annual Report.

What is the minimum Delaware franchise tax?

The Franchise Tax for a Delaware LLC or a Delaware LP is a flat annual rate of $300. 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.

Do LLC pay taxes in Delaware?

A. Delaware treats a single-member “disregarded entity” as a sole proprietorship for tax purposes. This means that the LLC itself does not pay taxes and does not have to file a return with the State of Delaware.

What are gross assets for Delaware franchise tax?

Discussion: Total gross assets are “total assets” reported on U.S. Form 1120 Schedule L for tax year ending prior to filing the Delaware franchise tax report.

What happens if you don't dissolve an LLC Delaware?

If you do not legally and officially cancel your LLC or dissolve your corporation, your company will continue to be held responsible for the annual Delaware Franchise Tax Fee as well as your annual Registered Agent Fee until either the Registered Agent resigns or until the State of Delaware voids the company.

What happens if you dont pay Llc taxes?

If you're an LLC owner who missed the deadline for filing taxes, you're probably wondering what happens next. The answer is rather straightforward: The IRS will charge you fees for not filing your LLC tax return. You'll also incur penalties and interest if you fail to pay your tax bill on time.

Are Delaware franchise taxes paid in arrears?

Your notification of annual report and franchise tax due is sent to a corporation's registered agent in December or January of each year. Delaware requires these reports to be filed electronically. Franchise taxes are generally due in arrears for the prior calendar year.

What happens if you don't dissolve an LLC Delaware?

If you do not legally and officially cancel your LLC or dissolve your corporation, your company will continue to be held responsible for the annual Delaware Franchise Tax Fee as well as your annual Registered Agent Fee until either the Registered Agent resigns or until the State of Delaware voids the company.

What are gross assets for Delaware franchise tax?

Total Gross Assets shall be those “total assets” reported on the U.S. Form 1120, Schedule L (Federal Return) relative to the company's fiscal year ending the calendar year of the report. The tax rate under this method is $400.00 per million or portion of a million.

What happens if you dont pay LLC taxes?

If you're an LLC owner who missed the deadline for filing taxes, you're probably wondering what happens next. The answer is rather straightforward: The IRS will charge you fees for not filing your LLC tax return. You'll also incur penalties and interest if you fail to pay your tax bill on time.

Why do companies incorporate in Delaware?

The state offers some tax benefits. Delaware doesn't impose income tax on corporations registered in the state which don't do business in the state. Also, shareholders who don't reside in Delaware need not pay tax on shares in the state. For these reasons, Delaware is sometimes referred to as a tax haven.

When are Delaware franchise taxes due?

Franchise Taxes and annual Reports are due no later than March 1st of each year. An annual Franchise Tax Notification is mailed directly to the corporation’s registered agent. Blank Franchise Tax Returns are not available. The Delaware Division of Corporations will require all Annual Franchise Tax Reports and alternative entity taxes ...

When are Delaware corporation tax returns due?

Franchise Taxes and annual Reports are due no later than March 1st of each year.

Do corporations have to file taxes in Delaware?

Corporations incorporated in Delaware but not conducting business in Delaware are not subject to corporate income tax, [30 Del.C, Section 1902 (b) (6)] but do have to pay Franchise Tax administered by the Delaware Department of State. Any corporation that is incorporated in Delaware (regardless of where you conduct business) must file an Annual ...

Do Delaware corporations have to file annual reports?

All corporations incorporated in the State of Delaware are required to file an Annual Report and to pay a franchise tax. Exempt domestic corporations do not pay a tax but must file an Annual Report. The Annual Report filing fee for all other domestic corporations is $50.00 plus taxes due upon filing of the Annual Report.

How Do I Pay My Delaware Franchise Tax?

We make it easy to pay Delaware Franchise Tax online, and our Franchise Tax calculator can help you determine the amount you owe.

What is franchise tax in Delaware?

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 Delaware Franchise Tax payment varies, depending on your company type.

Is My Delaware 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 and varies with the size of your business. The annual Registered Agent Fee is a fixed amount paid to Harvard Business Services, Inc. to act as an agent for your entity in the state.

How much is the annual report fee for franchise tax?

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

What is the annual report fee for a non-profit corporation in Delaware?

A corporation with 5,000 authorized shares or less is considered a minimum stock corporation. The Delaware annual report fee is $50 and ...

How much is the minimum payment for a company on Form 1120?

The tax is then often calculated to the minimum payment of $400 tax plus the $50 annual report fee, for a total of $450 due per year.

What happens when franchise tax reports are filed?

When franchise tax reports are filed or payments are made, sometimes errors or omissions occur. Our office sends notices letting the taxpayer know that there is a problem with the account.

When to enter franchise tax report?

For an annual report, enter the day after the end date the entity reported on its previous year’s franchise tax report.

When is Texas franchise tax due?

A Texas entity registered with the SOS on Dec. 20, 2020. It became subject to franchise tax on its registration date. So, on its 2021 “first annual” franchise tax report, it enters 12/20/2020 as its accounting year begin date.

When does the franchise tax year end for 2021?

An entity that is terminating this year entered the accounting year end date of 12/31/2020 on its 2021 annual franchise tax report. On its 2021 final franchise tax report, it will enter its accounting year begin date as 01/01/2021. Accounting Year End Date.

When is Texas SOS registration?

A Texas entity registered with the SOS on Dec. 20, 2020.

Why do businesses choose Delaware?

Businesses choose Delaware not for one single reason, but because we provide a complete package of incorporations services. The Delaware General Corporation Law is the most advanced and flexible business formation statute in the nation. The Delaware Court of Chancery is a unique 215 year old business court that has written most of the modern U.S. corporation case law. Delaware’s State Government is business-friendly and accessible. Our Division of Corporation is a model state-of-the-art efficiency and our staff provides prompt, friendly and professional service to clients, attorneys, registered agents and others. These factors have all contributed to making Delaware a premier legal home to companies around the world.

How to get an apostille for adoption in Delaware?

The Delaware Division of Corporations can apostille or authenticate documents notarized by a Delaware Notary, certified vital records from the State of Delaware, and official State documents (e.g., background checks). When such services are requested for personal use (such as an adoption) the Division discounts its fees to $30.00 for any documents that are presented simultaneously. This fee structure enables prospective international adoptive parents to minimize their costs by having all of their apostille and authentication documents processed at one time. As a further convenience, requests received via mail are typically processed on the same business day and hand delivered requests will be completed within 2 hours. To help expedite your request, mailed requests must include a cover memo clearly stating the purpose of the request (e.g. adoption in China). Documents may be either hand delivered, mailed or express mailed to: Division of Corporations – John G. Townsend Bldg. – 401 Federal Street – Suite 4 – Dover, DE 19901. Documents that are not picked up from our office will be sent regular first class mail unless a Federal Express or UPS or envelope is provided with the request. Please contact our office at (302) 739-3073 with any questions.

Does Delaware require foreign qualification?

Yes , Delaware law requires every corporation that is doing business in this state but is formed in another state or jurisdiction to submit a completed “ Foreign Qualification ” form with the Division of Corporations along with a Certificate of Existence issued by that state or jurisdiction.

Does Delaware require a registered agent?

No. Delaware law requires every corporation to have and maintain a Registered Agent in the State who may be either an individual resident, a domestic corporation, or a foreign corporation authorized to transact business in Delaware whose business office is identical with the corporation’s registered office.

Can a large corporate filer be recalculated?

No, if it has been identified as a Large Corporate Filer the Taxes cannot be recalculated it is a flat fee and pro-rations do not apply.

When are Delaware corporate taxes due?

A. Delaware corporate income tax returns are due in the case of a calendar year taxpayer, on or before April 15 of the following year. In the case of a fiscal year taxpayer, the return is due on or before the fifteenth day of the fourth month following the close of the fiscal year. Please note a federal extension automatically extends ...

What is the corporate income tax rate in Delaware?

Every domestic or foreign corporation doing business in Delaware, not specifically exempt under Section 1902 (b), Title 30, Delaware Code, is required to file a corporate income tax return (Form 1100 or Form 1100EZ) and pay a tax of 8.7% on its federal taxable income allocated ...

How long can a Delaware carryforward be?

The carryforward period is 20 years. The amount of the net operating loss recognized for Delaware corporate income tax purposes is only to the extent of ...

What is a 1902 exemption?

A. Corporations whose activities in Delaware are limited to the maintenance and management of their intangible investments may be exempt under Section 1902 (b) (8), Title 30, Delaware Code. Corporations may obtain a specific ruling from the Division of Revenue by submitting an Application of Exemption, Form 1902AP, describing their operations and stating the grounds for the exemption under Section 1902 (b) (8). Please note, Section 1904 (f), Title 30, Delaware Code, requires that corporations exempt under Section 1902 (b) (8) file an Annual Information Return (Form 1902 (b)) reporting sources of income and services provided within and without Delaware.

What is the penalty for filing a late tax return?

A. Corporate income tax returns filed late are subject to a penalty of 5% per month, plus interest of 0.5% per month from the original due date until paid. In addition to the above penalties and interest, an additional penalty of 1% per month (not to exceed 25%) is imposed for failure to pay (in whole or in part) the tax liability shown to be due on a timely filed return. (30 Del.C., Sec. 533 & 534)

Do non profit organizations have to file taxes in Delaware?

Generally, non-profit organizations who are recognized by the IRS as a 501 (c) (3) non-profit organization do not have to file a Delaware corporate income tax return. Please see Section 1902 (b), Title 30, Delaware Code, for a detailed list of exempt corporations. Please note, most non-profit organizations are required to file an annual report ...

Does a S corporation have to report income tax in Delaware?

A. Every S-Corporation deriving income from sources within Delaware must make estimated payments of personal income tax on behalf of its non-resident shareholders. Payments are based on the non-residents’ share of the distributive income of the corporation. Resident and non-resident shareholders must report their respective share of S distributive income on their individual personal income tax returns.

What is Delaware Franchise Tax?

Delaware franchise tax is a tax charged by the state of Delaware for the right to own a Delaware company. The tax does not affect income or company activity. The tax is required to maintain the company's good standing in Delaware.

How much is the late fee for franchise tax in Delaware?

If you pay your Delaware franchise tax late, you'll be charged a late fee. The late fee is $125.00 and a 1.5 percent monthly interest afterward.

Why do you need to use franchise tax in Delaware?

The Delaware franchise tax is beneficial to corporations because it is a simple process to submit and calculate payment. The Delaware franchise tax is also beneficial to businesses as it is a small fee in comparison to other states.

What information is required to file a franchise tax in Delaware?

When filing a franchise tax in Delaware, all the must be submitted is the physical address of the business and the name of the registered agent. This can be a business owner or someone else. By not requiring more information, businesses that file their franchise tax in Delaware can maintain privacy.

What happens if you don't file Delaware franchise tax?

If you don't file your Delaware franchise tax on time, you will be charged a late fee.

What is Delaware's court of chancery?

Delaware has what is called a Court of Chancery. This allows the state to adjudicate corporate litigation. The corporate laws and cases decided in Delaware are often used by the Supreme Court to influence decisions.

How much does it cost to register a foreign business in Delaware?

Foreign File. Business that are formed out of state but are registered to do business in Delaware must pay a $125 registration fee. Foreign corporations, those that are formed outside of Delaware, cannot file online. To file as a foreign corporation, mail in the necessary documents.