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Delaware Tax Deadlines: Annual Franchise Report & Franchise Tax Due On March 1

By February 13, 2024 No Comments

If your corporation is set up in Delaware, you’ve got to do two things by March 1st each year: file an annual franchise report and pay a Delaware tax fee to the department of state called the Delaware Franchise Tax.

In essence, the report covers who’s who and where’s where in your company – like your main office and the agent handling your official paperwork. It also dives into the nitty-gritty of your company’s shares and lists out all of the big players in your business, such as directors and the person signing off on your annual franchise report.

The good part? It’s all filed online, so no fumbling around with physical paperwork!

Who’s required to file this report?

This is a requirement for every Delaware-incorporated business out there. It doesn’t matter if you’re making your money in Delaware or somewhere else, or even if you’re not active at all.

Why is that? Well, the franchise tax isn’t tied to your company’s income. Instead, it’s a fee for the privilege of being a Delaware-incorporated entity.

And for the non-profits among us? No tax for you, but you still need to turn in that report by March 1. Oh – and there’s a small $25 fee to file it. Learn more about businesses that are exempt from the Delaware Division of Corporations.

How much do you owe? Calculating this Delaware tax

When it comes to settling your Delaware tax fees, there’s some math involved. (Would it be accounting without it?)

All corporations face a $50 filing fee, with the actual franchise tax calculated via one of two methods: the Authorized Shares Method or the Assumed Par Value Capital Method.

So, let’s talk numbers.

Under the Authorized Shares Method, the tax ranges from a minimum of $175 to a maximum of $200,000, based on the number of shares your corporation is authorized to issue.

Using this method, for up to 5,000 shares, the charge is $175. For shares ranging from 5,001 to 10,000, it bumps up to $250. And for every extra set of 10,000 shares (or any part of that), tack on another $85.

For companies without par value shares (which is a nominal value assigned to the company’s stock), the Authorized Shares Method is the one you’ll use.

The Assumed Par Value Capital Method sets the minimum tax at $400, with the maximum at $200,000. This method calculates the tax based on a per million dollar or portion thereof of assumed par value capital.

For the big players, or the corporations that are labeled as large corporate filers, they’re required to pay $250,000 in annual taxes. These are corporations with stocks listed on national exchanges, boasting hefty revenues or assets in their financials.

Corporations with a tax bill of $5,000 or higher must pay in quarterly estimated tax payments.

Here’s how the quarterly payment timeline breaks down:

  • 40% due by June 1
  • 20% due by September 1
  • 20% due by December 1
  • 20% due by March 1

Penalties for non-compliance with Delaware tax requirements

Failing to meet the March 1 deadline comes with a sting. If you don’t get your annual franchise report in on time, there’s a $200 late fee and you run the risk of losing your corporation’s good standing with the state of Delaware. Plus, if you’re late on the tax itself, they tack on interest of 1.5% every month on whatever you still owe.

Failure to comply over a long period of time, extending over a year, can lead to the voiding of your corporation’s charter. So, it’s safe to say that it’s important to stay on top of these Delaware tax requirements!

What if my business was formed in Delaware but isn’t a corporation?

Even though Limited Partnerships, Limited Liability Companies, and General Partnerships in Delaware don’t have to file an annual franchise report, they do need to cough up an annual tax of $300.

This tax is due every year by June 1st. If you’re late paying or don’t pay at all, there’s a $200 fine. Plus, there’s a monthly interest of 1.5% on both the tax and the fine if you’re behind.

Lighten your load with Acuity

Feeling overwhelmed with your accounting todo list? You’re not alone!

Managing the intricacies of franchise taxes and annual reports can be a daunting task, especially while you’re trying to keep your books up-to-date.

That’s where Acuity’s team of experts can help! We can take the reins on your books and your taxes, freeing up your time to focus on what you do best – running your business.

Ready to offload the stress and get back to business? Schedule a free consultation with our team below!

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