DE Franchise Tax - How To File Delaware Corporate Franchise Tax DIY
The Delaware Franchise Tax is due on March 1 for corporations each year. (Don’t let the name fool you – corporations owe this tax regardless of whether they’re a franchise or not!) Delaware corporations must file a completed annual report and pay the annual report filing fee and Franchise Tax by the due date.
If you’re not sure how to file the annual Franchise Tax in Delaware, here are the steps.
1: Calculate How Much You Owe
All non-exempt non-stock corporations pay a fixed franchise tax of $175. If your corporation doesn’t fall under this category, there are two methods to calculate the amount of Delaware Franchise Tax you owe:
- Authorized Shares Method
- Assumed Par Value Capital Method
The good news is your company pays the lesser of the two amounts! In the following steps, we will cover how to do the calculation for these two methods.
2.The Authorized Shares Method:
If your company has 5,000 shares or less, it pays the minimum tax of $175. For companies with 5,001 to 10,000 shares, the tax is $250. For companies with over 10,000 shares, the tax is $250 plus $85 for each additional 10,000 shares or portion thereof. The maximum annual tax is $200,000.
To summarize, if your company hasn’t issued many shares, it is cheaper to use the Authorized Shares method.
3: The Assumed Par Value Method:
For corporations using the Assumed Par Value Method, the minimum tax is $400. To use this method, the corporation must report its total number of issued shares (including treasury shares) and total gross assets. The tax rate using this method is $400 per $1,000,000 or part thereof of assumed par value capital. The maximum annual tax is $200,000. You are also required to attach a copy of your Balance sheet when using this method.
To summarize, if your company issued a lot of shares but doesn’t have too much assets, it is cheaper to use the Assumed Par Value method.
You can calculate your estimated tax owed with the state of Delaware’s Franchise Tax Calculator: https://corp.delaware.gov/taxcalc.shtml.
4. File electronically:
Delaware requires that all annual Franchise Tax reports be filed electronically. Here is the link to filing:
https://corp.delaware.gov/paytaxes.shtml
5. Pay the filing fee:
Delaware charges a $50 annual report filing fee (exempt corporations pay $25).
6. What if I missed the March 1 deadline?
Any late filing is subject to a $200 penalty, plus interest at 1.5 percent per month. On top of that, Delaware will not issue Good Standing Certificates for your company. After two years of non-filing and non-payment, the corporation’s Certificate of Incorporation will be revoked.
8. No sales? You still need to file an annual report and pay the tax:
Yes, seriously, you are still required to file the annual report and pay the Franchise Tax even if the corporation never engaged in any business.
If you have followed all the steps so far, congratulations! You are on your way to become a pro on filing Delaware corporation Franchise Tax! Let us know if you have any questions, we are here to help!
