Delaware LLC Franchise Tax: Everything You Need To Know

Delaware LLC Franchise Tax: Everything You Need To Know

The annual franchise tax is required and paid to the state of Delaware. Delaware provides a favorable tax shelter for U.S. corporations. There are other states, such as Nevada, that cost benefit analysis also do this. This leads to a high number of businesses being incorporated in those tax shelter states. You will also be charged a 1.5 percent monthly interest on the amount due.

  • The limited partnership (LP) Franchise Tax is also due by June 1 of every year.
  • Since the tax payment process is simple, businesses are more likely to want to be incorporated in Delaware.
  • With this type of business, your business income will be distributed to you as the sole proprietor.
  • If the tax is not paid on or before June 1, a late fee of $200 and a monthly interest of 1.5 percent will be charged.
  • Filing the annual report and paying the franchise tax as soon as possible help you avoid frustration and delays with other time-sensitive filings.
  • Harvard Business Services, Inc. guarantees your annual Delaware Registered Agent Fee will remain fixed at $50 per company, per year, for the life of your company.

Our annual Registered Agent Fee is $50 per year, and is due on the anniversary month of the formation of your company. The State of Delaware allows you to pay the lower of the two Delaware Franchise Tax calculation methods. Delaware LLC Franchise Taxes are due by June 1 of every year. The limited partnership (LP) Franchise Tax is also due by June 1 of every year.

How to Calculate Your Delaware Franchise Tax Fee

The Franchise Tax for a Delaware LLC or a Delaware LP is a flat annual rate of $300. There is nothing else you need to do after making payment. Just make sure to pay your Annual Franchise Tax each year going forward. In the “Payment Type” drop down list select whether you will pay with your checking account or with a credit card. After you form a Delaware LLC, you will have annual requirements to keep track of.

  • Often, the tax is then calculated to the minimum payment of $350, with a $50 annual report fee.
  • Foreign corporations, those that are formed outside of Delaware, cannot file online.
  • Business Entity File Number You’ll need your Business Entity File Number (also known as your “File Number”) in order to make payment online.
  • If you pay your Delaware franchise tax late, you’ll be charged a late fee.
  • The annual Franchise Tax is imposed by the State of Delaware and varies with the size of your business.

Franchise taxes on businesses formed under the laws of Delaware are due for Corporations on March 1, and for Limited Liability Companies and Partnerships on June 1. To be compliant, the owner of a Delaware LLC needs to pay the Delaware franchise tax in the coming weeks. If the Delaware Franchise Tax calculation uses the assumed par value capital method, the gross assets and issued shares are also to be listed. If you decide to pay your Delaware Franchise Tax for a corporation with us over the phone, the annual report would need to be separately submitted to us by email, fax or mail. Non-stock or non-profit companies are considered exempt from tax in Delaware. A non-stock/non-profit company is considered exempt by the State of Delaware.

How Do I Pay My Delaware Franchise Tax?

We recommend printing this email and keeping it with your business records. Whether your business is physically in Delaware or not, you don’t pay any state taxes. The limited partnership or LP franchise tax is also due on June 1.

If you need assistance in obtaining a Certificate of Good Standing, we can help you receive your certificate in two business days or less. The due date of your Delaware Franchise Tax payment varies, depending on your company type. We also recommend putting a repeating reminder on your calendar because even if you don’t receive a reminder notice, it’s still your responsibility to pay the tax every year. The methods of calculating Delaware Franchise Tax are detailed below.

Frequently Asked Questions

Along with your business’s annual Delaware franchise tax, your business is required to submit a Delaware annual report. Both the Delaware annual report and the Delaware franchise tax are due by March 1 each year. Corporations must complete an annual report along with their Delaware Franchise Tax payment. Corporations, LLCs and LPs are taxed in arrears, meaning the tax due by each due date is for the previous calendar year. 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.

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. In order to utilize this filing method, you will need to provide the company’s total gross assets (as reported on Form 1120, Schedule L) and the total number of issued shares. 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. Most of us know that April is the month when we file personal income tax returns with the Internal Revenue Service.

Reasons to consider using Delaware Franchise Tax

The Delaware Franchise Tax for a corporation is based on your corporation type and the number of authorized shares your company has. The total cost of the corporation’s Delaware Franchise Tax consists of an annual report fee and the actual tax due. Don’t forget about your Delaware franchise tax and annual report filings! Delaware corporations or Delaware LLCs that are actively conducting business need to stay compliant with the Delaware Division of Corporations to keep a business in good standing. Filing the annual report and paying the franchise tax as soon as possible help you avoid frustration and delays with other time-sensitive filings. When you submit your Delaware franchise tax payment, you’ll also need to submit an annual report.

LLC services

If your company falls into the maximum stock option of 5001 or more shares, there are two possible methods to calculate the Delaware franchise tax. When paying the annual report fee, corporations are sorted into two categories. If you don’t want to pay your Delaware franchise tax yourself, you can hire a registered agent to do it for you.

If your business was formed or is located in another state but generates income in Delaware, you may need to pay Delaware taxes. If you own a business that operates in multiple states, you will greatly benefit from the knowledge of a tax professional. Multistate taxes and determining nexus can be very complicated. To use this method, you must supply the company’s total gross assets and the total number of issued shares.

If you’re ready to file and pay your Delaware Franchise Tax now, please visit our online Franchise Tax payment form. Your Delaware franchise tax due date depends on the type of business you own. Business that are formed out of state but are registered to do business in Delaware must pay a $125 registration fee. Payment can be submitted with an electronic check or credit card. Filing your Delaware franchise tax is a simple, online process.

It’s important your Delaware Registered Agent has the correct contact information so they can provide you with a timely notice. If so, that document can be sent directly from the Delaware Secretary of State. This document certifies the date the company was formed, that the company is current, and that the company is in good standing. When you file your Delaware franchise tax, an annual report must also be filed. To reduce the taxes paid by a startup, use the Assumed Par Value method.

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