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Delaware Franchise Tax- Instructions for Calculating

delaware franchise tax calculator

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. Filing your Delaware franchise tax is a simple, online process. Unlike Delaware, Texas does not have established business courts with judges well versed in business law.

  1. Those are due at the end of the second month following each quarter (i.e 40% due on June 1, 20% due on September 1, 20% due on December 1, and remainder due on March 1), and any positive balance goes towards next year.
  2. If your business is operating in multiple states, your business may have “nexus” with those other states.
  3. These payments are determined based on the expected income and expenses of the business for that particular year, along with any other relevant factors such as tax credits or deductions.
  4. To reduce the taxes paid by a startup, use the Assumed Par Value method.

Last year, they moved to establish such courts in major Texas cities in an effort to streamline proceedings for corporate disputes. The courts won’t open until September, and much about how they will operate has yet to be established. The state has struggled to recruit judges with 10 or more years of experience in complex civil business litigation due to its refusal to boost pay for judges. The starting salary for a judge on the business courts would be $140,000. By comparison, a Delaware chancery judge starts at almost $185,000. We are unable to search for your company by name with the state’s system at this time.

Corporations not conducting business in Delaware still have to pay a franchise tax, which is collected annually by the Department of State. The minimum franchise tax is $175 for corporations using the Authorized Shares method and $400 for corporations using the Assumed Par Value Capital Method. In Delaware, corporations are subject to the Franchise Tax, which is administered by the Delaware Department of State. Both domestic and non-domestic corporations must pay this tax. It is important to note that corporations incorporated in Delaware but not conducting business in the state are not subject to corporate income tax, as per 30 Del.C, Section 1902 (b) (6). The Franchise Tax is a requirement for maintaining good standing status in Delaware, regardless of whether a corporation conducts business within the state or not.

This easy-to-use service is helpful for businesses looking to estimate their franchise tax payment as accurately as possible. The Delaware franchise tax for a corporation is slightly more complicated. Assumed Par Value Capital MethodWith this method your Delaware Franchise Tax bill is calculated based on issued shares, authorized shares and total gross assets. If a Delaware corporation fails to file a timely annual report, the State will assess an immediate penalty of $200, with interest at 1.5% per month, which is added to any unpaid tax balance. For a foreign corporation, the penalty for failing to file is $125. Further, in failing to file or to pay the appropriate remedial fees, the corporation would be out of “good standing” with the State.

Deadline: Delaware Franchise Tax

Delaware provides a favorable tax shelter for U.S. corporations. This leads to a high number of businesses being incorporated in those tax shelter states. When you file your Delaware franchise tax, an annual report must also be filed. 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. If your Delaware franchise tax is submitted late, a $125 late fee and interest fee of 1.5 percent will be charged.

Corporations are required to pay this fee for the privilege of doing business in the state. Often, the tax is then calculated to the minimum payment of $350, with a $50 annual report fee. This method calculates the tax based on the number of shares your corporation has authorized. Your corporation will owe an estimated $85 for each 10,000 shares authorized. The minimum tax when using this method is $175, and the maximum tax is $200,000. Once the required information is inputted, the calculator will generate an estimate of your franchise taxes due based on your Total Gross Assets and other relevant data.

Filing the Annual Franchise Tax Report

For credit card payments, major credit cards such as Visa, Mastercard, and American Express are typically accepted. To use an ACH debit payment, a business must provide their checking account information to allow for the tax charge to be directly withdrawn from their account. The goal of the Delaware franchise tax is to make owning a business how to calculate average treasury stock paid in Delaware simple. Since the tax payment process is simple, businesses are more likely to want to be incorporated in Delaware. If you don’t want to pay your Delaware franchise tax yourself, you can hire a registered agent to do it for you. The registered agent will charge a small fee to complete the filing of your Delaware franchise tax.

Delaware registered agents generally distribute these notifications to corporations by January. Payment of the franchise taxes and the completed annual reports are due no later than March 1. This article discusses the required contents of an annual report, the methods of answering certain questions, and related information useful for its completion and submission. Note that this discussion only applies to the franchise tax payable by corporations. LLCs and LPs pay a $300 flat fee per year, rather than a variable franchise tax depending on the number of shares.

Filing the Annual Franchise Tax Report involves providing the corporation’s file number and other relevant information to the Delaware Secretary of State. 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.

delaware franchise tax calculator

To get the specific calculations for your business, visit the Division of Corporations website and follow the instructions provided. In summary, special considerations must be given to Exempt Domestic Corporations, S Corporations, and Large Corporate Filers when dealing with Delaware Franchise Tax. Being aware and knowledgeable of the specific tax requirements for each type of entity will ensure accurate calculations and compliance with Delaware regulations. S Corporations, as well as large corporate filers, governed by the state of Delaware are subject to Franchise Tax, with different considerations for calculating the amount due.

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 article focuses on businesses that are operating solely in Delaware. If your business is operating in multiple states, your business may have “nexus” with those other states. This means that you’re likely to need to pay taxes in those states.

Delaware Franchise Tax: Everything You Need to Know

With this stock structure, the Delaware Corporation will pay a $225 Delaware Franchise Tax each year which includes the annual report fee. This will allow for the lowest annual fees which is sometimes beneficial for bootstrapped start-up companies. But what if you plan to bring aboard investors in the future and the need for more authorized shares is required? If the need arises, a Stock Amendment can be filed with the state for approval to increase the number of authorized shares of the Corporation. Interestingly, corporations incorporated in Delaware but not conducting business within the state are not subject to the Corporate Income Tax1. However, they are still required to pay the Franchise Tax, which is administered by the Delaware Division of Corporations2.

To file as a foreign corporation, mail in the necessary documents. The Delaware franchise tax for foreign corporations is due by June 30 every year. In summary, it is crucial for Delaware corporations to be aware of the annual filing requirements, including completing the Annual Franchise Tax Report, paying the respective fees, and meeting the due dates.

Authorized Shares Method

When you submit your Delaware franchise tax payment, you’ll also need to submit an annual report. 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. Delaware Franchise Tax is based on a Corporation’s total Authorized Shares. When clients are thinking about forming Delaware Corporations, one of the most important decisions to make is how many total Authorized Shares of Stock the Corporation will have along with the Par Value of the Shares. This information is listed on the Delaware Certificate of Incorporation filed in Delaware. And one of the most popular questions we receive daily is how many shares of stock should I start my Corporation with?

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