Delaware Franchise Tax FAQs

delaware llc franchise tax

The report is due by March 1st and must include information about the corporation’s assets and liabilities. Failure to file a yearly report can result in a late fee of $200. Franchise “Tax” is often misinterpreted to mean that the fee will be calculated based on profits or capitalization, but that is not the case with Delaware LLC franchise tax.

delaware llc franchise tax

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. Corporations must complete an annual report along with their Delaware Franchise Tax payment. Delaware Franchise Taxes for corporations are due by March 1 of every year. If the tax is not paid on or before March 1, the state imposes a $200 late penalty, plus a monthly interest fee of 1.5%.

Where do I get my total gross assets?

This means that you’re likely to need to pay taxes in those states. Foreign corporations, those that are formed outside of Delaware, cannot file online. Delaware franchise tax is a tax charged by the state of Delaware for the right to own a Delaware company. The tax is required to maintain the company’s good standing in Delaware. If you’ve formed an LLC but haven’t done business this year, you may be wondering if you need to pay the Delaware franchise tax.

  • The late fee is $125.00 and a 1.5 percent monthly interest afterward.
  • If the Delaware Franchise Tax calculation uses the assumed par value capital method, the gross assets and issued shares are also to be listed.
  • This conversion to partnership taxation may have tax consequences to the original member.
  • These Delaware LLC taxes are based on your income at the then-current corporate tax rate (currently 21%).

Working with a CPA located in Delaware is not required for operating a Delaware LLC. As a business owner, you are free to work with a tax professional in your home state. This is because you will pay taxes from where you operate and will likely not have Delaware specific tax issues. Delaware provides a favorable tax shelter for U.S. corporations.

I haven’t started doing business yet. Do I still have to file a report and pay taxes?

Therefore, the minimum Delaware franchise tax and annual report payment total is $225 a year for Delaware domestic corporations. All businesses formed in Delaware, including tax-exempt businesses, need to file an annual franchise tax report by March 1st of each year, and pay a filing fee of $50. Tax-exempt businesses do not pay the Delaware franchise tax or penalties, but they still need to file and pay the annual report fee to remain in compliance. Most of us know that April is the month when we file personal income tax returns with the Internal Revenue Service. Franchise taxes on businesses formed under the laws of Delaware are due for Corporations on March 1, and for Limited Liability Companies and Partnerships on June 1. To be compliant, the owner of a Delaware LLC needs to pay the Delaware franchise tax in the coming weeks.

delaware llc franchise tax

The online fee will vary depending on when the online payment is submitted. The term “Franchise Tax” does not imply that your company is a franchise business. Penalty If you do not file your Annual Franchise Tax by June 1st, you will be charged a late fee of $200. Your account will also be penalized at 1.5% interest for every month it remains unpaid. Despite the similarities, it’s also important to highlight the differences between S-Corp taxation and partnership taxation.

How does Delaware calculate franchise tax?

This detailed guide will help you understand all of the costs involved when starting a Delaware LLC. The HBS Blog offers insight on Delaware corporations and LLCs as well as information about entrepreneurs, startups and general business topics. Delaware LLCs do not have to complete the annual report, but still pay the $300 Delaware LLC Franchise Tax fee. Yes, regardless of your Delaware company activity or not conducting business, you are still required to pay the Delaware Franchise Tax to remain in Good Standing. If your company is no longer active and you wish to close your business, be sure to follow the proper steps to Dissolve a Corporation, or Cancel an LLC. Franchise Tax is the fee imposed by the State of Delaware for the right or privilege to own a Delaware company.

  • The total cost of the corporation’s Delaware Franchise Tax consists of an annual report fee and the actual tax due.
  • If you have any questions about the tax or how to pay it, be sure to consult the official website or contact the Department of Finance.
  • You can find your LLC’s File Number by searching the database here.
  • As your Registered Agent, we will send you tax reminders both by mail and email, well in advance of the due date.
  • The Delaware Franchise Tax is an annual tax that must be paid by all corporations that are registered in the state.

Instead, the taxable income generated by an S corporation is passed to individual shareholders. Shareholders must pay federal taxes on their shares when they file their personal taxes. Corporations, LLCs and LPs are taxed in arrears, meaning the tax due by each due date is for the previous calendar year.

Cost

Title 8 Chapter 5 § 502 (c) states that a penalty of $125.00 is assessed for failure to file the Annual Franchise Tax report by March 1st. You can find more comprehensive information about franchise tax rates, how to calculate when is the best time to incorporate your business Delaware franchise tax, and tax calculators here. Or you can go directly to the Delaware Secretary of State franchise tax calculator(s) here. Businesses pay a fee that varies depending on the amount of assumed no-par capital.