The Delaware Franchise Tax is the fee that you pay for the ability to incorporate in the state of Delaware and take advantage of their tax statutes.
Tax Calculation Methods
Delaware uses two methods for franchise tax calculation: the Authorized Shares Method and the Assumed Par Value Capital Method.
Maximum Franchise Tax in Delaware
For corporations using the Assumed Par Value Capital Method, the minimum franchise tax is $350 and the maximum tax is $200,000. Failure to pay the tax will result in penalties.
Understanding Franchise Tax Calculation
The franchise tax applicable to Delaware corporations is determined by the nature of the company and the number of authorized shares.
Business Obligations
The annual franchise tax is necessary for any for-profit organization formed in Delaware, regardless of whether they conduct commerce or generate revenue in the state.
Franchise Tax Payment
If you incorporated in Delaware, you need to pay a Delaware Franchise Tax. The deadline is typically the last day of February.
Franchise Tax Calculation Methods
Delaware uses two methods to calculate franchise taxes: Authorized Shares Method and Assumed Par Value Capital Method.
Paying Franchise Tax
Filing your Delaware franchise tax is a simple, online process with three steps: calculating your fees, entering business entity information, and paying the tax.
Consequences of Non-Payment
Failure to pay the franchise tax by the deadline will result in penalties and may prevent your business from obtaining a certificate of good standing.
Understanding Franchise Tax
Not fully understanding the calculation methods can lead to costly tax bills for businesses, so it’s crucial to be informed and pay attention to the due dates.
Fees and Obligations
Delaware franchise tax applies to C Corporations, S Corporations, and LLCs. The tax is collected yearly, along with an annual report filing fee.
Tax Reduction
There are methods to reduce your Delaware franchise tax burden, such as careful calculation and complying with payment deadlines.