Delaware LLC Annual Franchise Tax Step-by-step LLCU®

Let’s also imagine it has authorized and issued 100,000 shares at a par value of $2.00 each, and 100,000 shares at par value of $10.00 each. Let’s also assume the number of shares issued and authorized is the same for simplicity’s sake. You will receive an email confirmation from the state showing that you have made the payment successfully. The Delaware franchise tax due date varies, based on a few different factors. The Franchise Tax for a Delaware LLC or a Delaware LP is a flat annual rate of $300. Read on to find out how much you’ll pay, or visit our Delaware Franchise Tax calculator app for a quick answer.

When are my payments due?

This method is a bit more complicated, because it involves calculating your business’s assumed par value—i.e. After you form a Delaware LLC, you will have annual requirements to keep track of. Harvard Business Services, Inc. guarantees your annual https://www.online-accounting.net/retained-earnings/ Delaware Registered Agent Fee will remain fixed at $50 per company, per year, for the life of your company. If you need assistance in obtaining a Certificate of Good Standing, we can help you receive your certificate in two business days or less.

What Happens If I Don’t Pay the Delaware Franchise Tax?

However, for Delaware LLCs, the franchise tax is better understood as a flat “maintenance fee” for the privilege of enjoying the legal protections of an LLC in Delaware. If your company has authorized 5,000 shares or fewer, your total Delaware franchise tax amount is $175. Under this method, your franchise tax is based on how many shares your corporation has authorized. 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. This $300 tax must be paid by every LLC formed in Delaware, regardless of income or business activity.

The Authorized Shares method

The Delaware Franchise Tax is an annual requirement that all companies registered in Delaware have to complete. The State of Delaware requires every registered LLC to pay a flat fee of $300 each year to remain in good standing, regardless of business activity. Let’s imagine a Delaware-incorporated company reported total gross assets of $1,000,000 on their federal taxes this year.

If your company is no longer active and you wish to close your business, be sure to follow the proper steps to Dissolve a Corporation, or Cancel an LLC.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 Delaware Franchise Tax has no bearing on income or company activity; it is simply required by the State of Delaware to maintain the good standing status of your company. If you’re ready to file and pay your Delaware Franchise Tax now, please visit our online Franchise Tax payment form. Alternatively, you can use a filing service, such as defrantax.com, to assist with your payment. For these reasons, more than a million businesses are incorporated in Delaware, including more than half of all publicly traded and Fortune 500 companies.

What Happens if Delaware Franchise Tax Is Paid on Time?

1. The Delaware Franchise Tax is an annual requirement that all companies registered in Delaware have to complete.
2. The tax is then often calculated to the minimum payment of $400 tax plus the $50 annual report fee, for a total of $450 due per year.
3. If you need help with Delaware franchise tax for your LLC or other company, you can post your legal need on UpCounsel’s marketplace.

The franchise tax is due even if the business didn’t conduct any activity or lost money. If your company is no longer operating, it’s important to close your Delaware business and end these fees. 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%. A franchise tax, sometimes called a privilege tax, is a fee you pay for the privilege of doing business in a certain state.

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. You must file your annual report if your business is a corporation and pay your franchise tax and filing fee by March 1. All LLCs, Limited Partnerships, and General Partnerships formed in Delaware are required to pay the annual franchise tax by June 1.

The limited partnership (LP) Franchise Tax is also due by June 1 of every year. If the tax is not paid on or before June 1, the state imposes a $200 late penalty, plus a monthly interest fee of 1.5%. The term “Franchise Tax” does not imply that your company is a franchise business. Payment information and a payment voucher are sent to the Delaware Registered Agent.

If you’re trying to figure out if you owe Delaware franchise tax, Bench can help. Our all-star team does your monthly bookkeeping for you and sends your financials to trusted tax professionals for a stress free filing experience. The Delaware franchise tax is collected every year by the Delaware Department accounting for consignment inventory of State. They mail your official business address an annual reminder to pay your franchise taxes. This tax is often calculated to the minimum payment of $350 for the Franchise tax and another $50 for the annual report fee. This method allows the company to pay the lower of two calculated tax amounts.

The Assumed Par Value Capital Method is complex, but companies are welcome to use a franchise tax calculator to make the process easier. Since 1981, Harvard Business Services, Inc. has helped form 410,790 Delaware corporations and LLCs for people all over the world. The HBS Blog offers insight on Delaware corporations and LLCs as well as information about entrepreneurs, startups and general business topics. If you’ve formed a Delaware LLC but haven’t conducted business this year, you might be wondering if you still need to pay the Delaware Franchise Tax.

In some cases, it may be better to calculate the franchise tax with the assumed par value capital method. These include a business-friendly court system, flexible incorporation rules, and the fact that businesses operating only outside of Delaware don’t have to pay state corporate income tax. The state of Delaware uses this method to calculate the company’s taxes initially.

The State of Delaware allows you to pay the lower of the two Delaware Franchise Tax calculation methods. Therefore, if you receive a tax bill for tens of thousands of dollars, it may be in your best interest to try calculating your Delaware Franchise Tax with the assumed par value capital method. If a company fails to pay its franchise tax, it will eventually lose its good standing. This is crucial https://www.wave-accounting.net/ to understand because a lapsed or void LLC exposes its members to personal liability, which they would otherwise be protected from if they paid the franchise tax on time. For every additional 10,000 shares authorized after that, you pay another $85 in franchise tax, up to a maximum of $200,000. Keep in mind, this number could be different from the number of shares your company has actually issued.

The total cost of the corporation’s Delaware Franchise Tax consists of an annual report fee and the actual tax due. Paying a franchise tax is a legal requirement for business incorporated in the state of Delaware. Failure to pay the annual franchise tax can result, in penalties, fines, or even the loss of right to conduct lawful business. You’ll incur a $200 penalty if you don’t file an annual report on or before March 1.