Delaware Franchise Tax; Everything You Need to Know

If you own a business in Delaware, you might have heard about the Delaware Franchise Tax. But what is it, and why is it important? In this blog post, we will go over everything you need to know about the Delaware Franchise Tax, including when it is due, how it is calculated, how much you can expect to pay and the easiest way to file your taxes online.

What is the Delaware Franchise Tax?

The Delaware Franchise Tax is a one-time state fee that companies are required to pay in order to maintain good standing status in Delaware. It is a tax for the right or privilege to own and operate a Delaware company, and it is due even if your business did not conduct any activity or lost money in the previous calendar year.

When is it due?

The due date for the Delaware Franchise Tax depends on the type of business entity. C Corporation Franchise Tax is due by March 1 of every year, while Delaware LLC Franchise Tax and limited partnership (LP) Franchise Tax are due by June 1 of every year. It is important to note that if you do not pay by the due date, you will incur a late payment penalty of $200 plus a monthly interest fee of 1.5%.

How is it calculated?

There are two methods for calculating Franchise Tax:

• Authorized Share Method
• Assumed Par Value Method.

The Authorized Share Method is the default method used by the state, and it is used to calculate the tax for C Corporations. Under this method, the tax is based on your corporation type and the number of authorized shares your company has.

For instance, if you are a C corp with 5,000 authorized shares or less, you are considered a minimum stock corporation, and you will owe a total of $225 per year (annual report fee of $50 plus tax due of $175). On the other hand, if you are a C corp with 5,001 authorized shares or more, you are considered a maximum stock corporation, and your total cost will be $50 for the annual report fee plus tax due between $400 and $200,000 per year.

The Assumed Par Value Method, on the other hand, is used to calculate the tax for corporations by calculating tax as a function of total assets. By using this method, corporations can minimize their franchise taxes.

How much can you expect to pay?

The Franchise Tax for a Delaware LLC is a flat annual rate of $300. For C Corporations, the amount varies depending on the corporation type and the number of authorized shares. While the tax might seem daunting, it is important to remember that it is required to maintain good standing status and avoid any penalties.

How to file Delaware Franchise Tax

If you already own a business in Delaware, especially as a non-resident, there’s an easy way to calculate and pay your taxes. With Norebase Company Maintenance Service, you can file your taxes from anywhere in the world. Simply click here to sign up and file your taxes using the Company Maintenance option.

The Delaware Franchise Tax might seem confusing, but it is an important fee that every business owner in Delaware should be aware of. By knowing when it is due, how it is calculated, and how much you can expect to pay, you can better prepare and ensure that your business stays in good standing status.