Delaware Franchise Tax: How to Calculate and Pay Bench Accounting

The default payment amount listed on your notification is set by Delaware using the Authorized Shares Method, which will almost always result in a much higher amount due for startups with limited assets. There is a helpful Franchise Tax Calculator on the Delaware website to assist in estimating your franchise taxes (note there is a different calculator for each of the 2017 and 2018 tax years). In addition to the franchise tax, there is also a $100 filing fee for the annual report.

How Do I Pay My Delaware Franchise Tax?

They mail your official business address an annual reminder to pay your franchise taxes. These include a business-friendly court system, flexible incorporation rules, and the fact that businesses operating only outside of Delaware don’t have to pay state corporate income tax. As your Registered Agent, we will send you tax reminders both by mail and email, well in advance of the due date.

File Online

The Delaware Franchise Tax for a corporation is based on your corporation type and the number of authorized shares your company has. The total cost of the corporation’s Delaware Franchise Tax consists of an annual report fee and the actual tax due. 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. 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. If you are a startup that has chosen Delaware as its state of incorporation, you are likely aware that you are subject to Delaware franchise tax.

Annual Report and Tax Instructions

Read on to find out how much you’ll pay, or visit our Delaware Franchise Tax calculator app for a quick answer.

Doing Business in Delaware

1. Let’s imagine a Delaware-incorporated company reported total gross assets of $1,000,000 on their federal taxes this year.
2. A corporation with 5,000 authorized shares or less is considered a minimum stock corporation.
3. You’ll also pay 1.5% per month applied against any unpaid tax and penalty.

To use this method, you must provide figures accounting equation definition for all issued and outstanding shares and total gross assets in the spaces provided in your annual franchise tax report. Total gross assets shall be those « total assets » reported on the US Form 1120, Schedule L (Federal Return) relative to the corporation’s fiscal year ending the calendar year of the report. The tax rate under this method is $350 (to be increased to $400 effective for the 2018 tax year) per million or portion of a million. If the assumed par value capital is less than $1 million, the tax is calculated by dividing the assumed par value capital by $1 million then multiplying that result by $350. You must file your annual report if your business is a corporation and pay your franchise tax and filing fee by March 1.

Get free guides, articles, tools and calculators to help you navigate the financial side of your business with ease. The magic happens when our intuitive software and real, human support come together. The Franchise Tax for a Delaware LLC or a Delaware LP is a flat annual rate of $300.

If the Annual Report and remittance is not received by the due date, a $125.00 penalty will be added to filing fee. An annual Franchise Tax Notification is mailed directly to the corporation’s registered agent. The Delaware Division of Corporations will require all Annual Franchise Tax Reports and alternative entity taxes to be filed electronically. 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.

After missing the deadline, you’ll need to pay a $200 late fee with cumulative interest each month. Paying a franchise tax is a legal requirement for business incorporated in the state of Delaware. Failure to pay the annual franchise tax can result, in penalties, fines, or even the loss of right to conduct lawful business. There are two methods that you can use to calculate the amount of Delaware franchise tax due for your corporation (the Authorized Shares Method and the Assumed Par Value Capital Method), which result in vastly different amounts due. For corporations using the Authorized Shares Method, the minimum franchise tax is $175 and the maximum franchise tax is $200,000.