DE Franchise Report & Tax Requirement

The HBS Blog offers insight on Delaware corporations and LLCs as well as information about entrepreneurs, startups and general business topics. The online fee will vary depending on when the online payment is submitted. We offer a tax filing service for a small fee in addition to your Franchise Tax amount. The State of Delaware uses this method to initially calculate your taxes. A corporation with 5,001 authorized shares or more is considered a maximum stock corporation.

Annual Report and Tax Information

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%. The due date of your Delaware Franchise Tax incremental analysis: a simple tool for powerful decision-making payment varies, depending on your company type. If you’re ready to file and pay your Delaware Franchise Tax now, please visit our online Franchise Tax payment form. Other entity types have different due dates; for instance, LLCs and LPs must pay their flat $300 annual tax by June 1st.5Justia. The portal accepts payments via major credit cards or electronic check (ACH), though payment by ACH is required for transactions over $5,000. Limited Liability Companies (LLCs), Limited Partnerships (LPs), and General Partnerships (GPs) also have an annual tax obligation, though it is a flat fee.2Justia.

Distinguishing Requirements for Corporations and LLCs

The Delaware Secretary of State publishes dissolution notices, and dissolved status appears on public records, potentially affecting business relationships, banking, self billing of tax invoices and insurance coverage. Corporations failing to pay for two consecutive years face administrative dissolution proceedings. CPA firms, in turn, must guide clients through this process every year, helping them avoid common mistakes and optimize their filings. This support allows CPA firms to serve more clients, improve filing accuracy, and reduce compliance risk. CPA firms play a critical role in helping clients understand their obligations, prepare reports accurately, and make cost-effective decisions.

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Therefore, in order to obtain a copy of a filed annual report, the document must be requested from the secretary of state’s office for a fee. Every annual report and the information listed becomes part of the official filing history of the company. Harvard Business Services, Inc. can help obtain a copy of a previously filed annual report or file an amended report for a company. Every annual report that is filed by the company is kept on record and stored electronically with the state.

Delaware Annual Report FAQ

Failing to maintain a registered agent can result in administrative dissolution, similar to not paying franchise taxes. CPA firms assisting clients should prepare an annual summary with these key inputs to streamline the franchise tax report calculation process. For corporations using the assumed par value capital method, you will need accurate financial statements to support your filing. Using the authorized shares method may not be optimal for companies identified as a large corporate entity with many authorized shares.

• All Delaware corporations must pay franchise tax, while LLCs pay a flat annual tax of $300.
• Limited Liability Companies and Limited Partnerships that fail to pay their $300 Annual Tax by the June 1st deadline face an equivalent late penalty of $200.
• Corporations with a tax liability of $5,000 or more must make estimated payments.
• The Delaware Corporate Annual Report is a two-part requirement encompassing the disclosure of corporate information and the assessment of the Franchise Tax.

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• Many states charge minimum fees plus income-based taxes, while Delaware’s franchise tax is independent of income or profits.
• Corporations that neglect or fail to pay the franchise tax, or to file a complete franchise tax report, for more than one year will have their charters voided.
• The Delaware Franchise Tax for a corporation is based on your corporation type and the number of authorized shares your company has.
• Most small corporations benefit from the Authorized Shares Method, while larger corporations often use the Assumed Par Value method for lower tax obligations.

For Corporations

The tax amount is usually $400 (+$50 government fee) for most early companies, but goes up a lot if you have millions in assets. This action dissolves the company, stripping it of its legal rights and protections as a Delaware corporation.7Justia. A delinquent status will also prevent the corporation from obtaining a Certificate of Good Standing, which can impede business transactions like securing loans or entering into contracts. The online system will guide you through entering the required information for the Annual Report, including director and officer details, and the financial data needed for the tax calculation. Beyond 10,000 shares, the tax is $250 plus an additional $85 for each block of 10,000 shares or portion thereof.

A non-stock/non-profit company is considered exempt by the State of Delaware. 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.

Franchise Tax in Delaware: How to Calculate and Pay

It is unacceptable to file an annual report marked “same as last year.” Therefore, regardless of whether there are any changes within the company throughout the year or not, a brand new report is required to be filed every year. Failing to pay your franchise tax by March 1st for corporations or June 1st for LLCs will result in a late penalty and interest. 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.

Assumed Par Value Capital Method

Set reminders well ahead of March 1 (for corporations) and June 1 (for LLCs). While franchise tax cannot be avoided, proper planning can help reduce your gross merchandise volume burden and eliminate surprises. To avoid these issues, small businesses and their accounting partners must track deadlines carefully and use compliance checklists as part of annual planning. Every missed payment incurs penalties and interest, compounding over time.

This is not the same as your Delaware annual report and will not mention internal company information, such as director or officer details. Yes, regardless of your Delaware company activity or not conducting business, you are still required to pay the Delaware Franchise Tax to remain in Good Standing. Business owners with multiple LLCs and LPs can pay franchise tax for multiple businesses at the same time. Like the Authorized Shares method, the maximum franchise tax fee is still $200,000.

Annual Report and Filing Requirements

Corporations must complete an annual report along with their Delaware Franchise Tax payment. The annual report fee is $50 and the tax would be somewhere between $200 and $200,000 per year, as illustrated below. Failure to pay the annual franchise tax can result, in penalties, fines, or even the loss of the right to conduct lawful business. 8 Delaware Code § 504 (2024) – Collection and disposition of tax; tentative return and tax; penalty interest; investigation of annual franchise tax report; notice of additional tax due. Domestic corporations must file the Annual Report and pay tax electronically through the Division of Corporations’ online portal.

This is the default method applied if no alternative is selected when filing. This flexibility can lead to major savings, especially for startups and early-stage companies with high authorized shares but low actual revenue. You are allowed to choose the method that results in the lower tax liability.

All corporations and LLCs registereed in Delaware, regardless of business activities or location, are required to file and pay franchise tax (along with the directors’s annual report in the same filing). Certain non-profit corporations are not required to pay the franchise tax but still must file an Annual Report and pay a smaller filing fee. While LLCs and LPs are not required to file an annual report, they still need to pay their annual franchise tax. Delaware annual report filing is due by March 1 every year, along with an annual Delaware Franchise Tax payment for all corporations. Owners of multiple corporations will need to pay Delaware Franchise Tax for each entity separately as each entity is required to file an annual report.

CPA firms working with Delaware corporations should always run both calculations before submitting the annual report. Under this method, your franchise tax is based solely on the number of shares your company is authorized to issue, regardless of whether those shares are issued or outstanding. LLCs do not file an annual report in Delaware but still face penalties and interest if this flat tax is missed. If the report is not filed (and payment not paid) on or before March 1, a penalty of $200 is applicable along with interest at 1.5% per month on the unpaid balance. These payments are due as follows – 40% by June 1, 20% by September 1, 20% by December 1 and the balance due with the annual report by March 1. Both methods have a maximum tax of $200,000 ($250,000 if the corporation is identified as a large corporate filer).

Once the dissolution filing has been approved by the state of Delaware, no further Franchise Tax Fees will be imposed upon the corporation. In order to formally and legally close a corporation, a Certificate of Dissolution must be filed. Alternatively, you can also search for your business entity on the Delaware Entity Search to confirm its filing status online. The officers and Directors of a company are elected to manage the affairs of the corporation.

Maintain records of all filings, payments, and correspondence with Delaware authorities. LLCs also face administrative cancellation for failing to pay taxes for three consecutive years. Late payments incur a $200 penalty plus 1.5% monthly interest on unpaid amounts.

All corporations incorporated in the State of Delaware are required to file an Annual Report and to pay a franchise tax. All companies that are incorporated in the state of Delaware are required to pay an annual Franchise Tax and file an annual report in order to maintain their corporate existence and good standing status. Even though a copy of a filed annual report can be obtained, any information regarding a company’s total gross assets and total issued shares will not be disclosed. The Delaware corporation’s annual report is filed with the Delaware Secretary of State’s office, where it remains part of the company’s official filing history. When you file your Delaware annual franchise taxes with us or online with the state of Delaware, your annual report is automatically generated and filed based on the information you enter.