Franchise Tax is essentially the fee for maintaining a business in Delaware. It is a mandatory tax for all companies incorporated in the state, unrelated to business activities or income, and is solely required to keep your business operational.
When Do You Need to Pay?
The payment deadline varies depending on your type of business:
•Corporations: The deadline is March 1st each year. Failing to meet this deadline incurs a $125 penalty and 1.5% interest monthly on the unpaid amount.
•LLCs and Limited Partnerships (LPs): The deadline is June 1st annually. Missing this deadline results in a $200 penalty and 1.5% interest per month on the unpaid balance.
All entities must pay their Franchise Tax for the previous calendar year.
How is Franchise Tax Calculated?
•LLCs and Limited Partnerships: The annual Franchise Tax is $300.
•Corporations: The Franchise Tax is based on the number of shares the corporation holds. It includes an annual reporting fee and an estimated tax.
•Non-Profit Organizations: These are exempt from Franchise Tax but must pay a $25 annual reporting fee.
•Corporations with 5,000 shares or fewer: Pay a $50 reporting fee and $175 in taxes, totaling $225.
•Corporations with 5,001 or more shares: Pay a $50 reporting fee and taxes ranging from $200 to $180,000, depending on the calculation method chosen.
Methods for Calculating Franchise Tax:
1. Authorized Shares Method:
•5,000 shares or fewer: $175
•5,001 to 10,000 shares: $250
•For every additional 10,000 shares: $75
•Maximum charge: $180,000
•Plus $50 annual reporting fee.
2. Assumed Par Value Capital Method:
This method involves listing your company’s assets and shares and can be more complex, but it may lower your tax bill. If you receive a high tax bill, calculating your tax using this method is recommended. Contact us for assistance with this calculation.
Does Franchise Tax Include the Registered Accountant Fee?
No, Franchise Tax and registered accountant fees are separate. You need to pay your accountant or accounting firm directly, while the Franchise Tax is paid to the State of Delaware.
Get Help With Your Payments
You can utilize our Accounting Services to manage your annual payments and keep your business compliant.
Choose one of our services to start or manage your business in the U.S., and feel free to contact us for further information or assistance.
Contact Us
For pre-sales inquiries or help, call us at +1 302 310 21 76 (WhatsApp available!).
