Harvard Business Services, Inc

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. Delaware franchise tax is a tax charged by the state of Delaware for the right to own a Delaware company. The tax is required to maintain the company’s good standing in Delaware. The Assumed Par Value Capital Method in the above example results in a much lower tax ($26,800 vs. $170,165). Delaware would automatically show the higher tax due on their website using the authorized shares method.

The total cost of the corporation’s Delaware Franchise Tax consists of an annual report fee and the actual tax due. Non-stock or non-profit companies are considered exempt from tax in Delaware. Often, the tax is then calculated to the minimum payment of $350, with a $50 annual report fee. When clients are thinking about forming Delaware Corporations, one of why changing the corporate tax rate doesn’t help you the most important decisions to make is how many total Authorized Shares of Stock the Corporation will have along with the Par Value of the Shares. This information is listed on the Delaware Certificate of Incorporation filed in Delaware. And one of the most popular questions we receive daily is how many shares of stock should I start my Corporation with?

• If you don’t want to pay your Delaware franchise tax yourself, you can hire a registered agent to do it for you.
• 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.
• Both the Delaware annual report and the Delaware franchise tax are due by March 1 each year.
• The total cost of the corporation’s Delaware Franchise Tax consists of an annual report fee and the actual tax due.
• You will pay tax to the state on that income on your individual state tax return.
• If your company is no longer operating, it’s important to close your Delaware business and end these fees.

As long as your issued shares constitute a third to half of your authorized shares, this method will save you money. This means that if you receive a high bill that was calculated under the first method, you can request a recalculation using the second method. Delaware Franchise Tax calculations are prorated if a corporation’s authorized and/or issued shares change during the year. The minimum franchise tax is $175.00 for corporations using the Authorized Shares Method and $400.00 for corporations using the Assumed Par Value Capital Method. All corporations using either method will have a maximum tax of $200,000.00 unless it has been identified as a Large Corporate Filer, then the tax will be $250,000.00.

Delaware Franchise Tax: Everything You Need to Know

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 don’t want to pay your Delaware franchise tax yourself, you can hire a registered agent to do it for you.

• Thus, it is generally advisable to avoid no par value stock and to assign a very low par value to shares if possible.
• The tax is required to maintain the company’s good standing in Delaware.
• 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.

Whether your business is physically in Delaware or not, you don’t pay any state taxes. This is the first method that is typically used to calculate tax. Payment can be submitted with an electronic check or credit card. Filing your Delaware franchise tax is a simple, online process.

What is Delaware Franchise Tax?

The Delaware franchise tax for a corporation is slightly more complicated. It is based on the corporation type and authorized shares. Authorizing excessive shares of stock can result in a higher annual franchise tax liability. A large widely held public company might have difficulty reducing their authorized and/or issued shares but a start-up technology or life sciences company may have more flexibility. Ideally, Delaware Franchise Tax liability should be quantified prior to incorporating in the state and prior to any new shares being authorized or issued. The Delaware Franchise Tax for a corporation is based on your corporation type and the number of authorized shares your company has.

Using the Delaware Franchise Tax Calculator

“EisnerAmper” is the brand name under which EisnerAmper LLP and Eisner Advisory Group LLC and its subsidiary entities provide professional services. EisnerAmper LLP is a licensed independent CPA firm that provides attest services to its clients, and Eisner Advisory Group LLC and its subsidiary entities provide tax and business consulting services to their clients. Eisner Advisory Group LLC and its subsidiary entities are not licensed CPA firms. The HBS Blog offers insight on Delaware corporations and LLCs as well as information about entrepreneurs, startups and general business topics.

Annual Report Filing Fee:

Delaware provides a Microsoft Excel worksheet that can be used to show the tax based on various assumptions. The tax under this method is $400 per $1,000,000, or portion thereof, of assumed par value. A non-stock/non-profit company is considered exempt by the State of Delaware. This type of company does not pay the standard annual Delaware Franchise Tax, but must still file and pay the annual report fee of $25 per year.

Reasons to consider using Delaware Franchise Tax

Just want to highlight that Justin Damiani is one of the BEST customer support reps I have ever interfaced with. You could do a lot worse than sending him an email to get your business started & sorted with HBS.

Annual Report Franchise Tax:

To file as a foreign corporation, mail in the necessary documents. The Delaware franchise tax for foreign corporations is due by June 30 every year. In addition to paying the Franchise Tax, Delaware requires every corporation to have and maintain a registered agent in the State. This is a person or a representative that is physically located in Delaware. If a company doesn’t have a physical presence in Delaware, there are professional registered agents available for hire; prices and levels of service vary.

A tax haven or shelter is a method of reducing taxable income which results in a reduction of tax payment. The method is any that recovers more than $1 in tax for ever $1 spent within a four-year period. A tax shelter can be created by an individual or a corporation. To reduce the taxes paid by a startup, use the Assumed Par Value method. If you don’t file your Delaware franchise tax on time, you will be charged a late fee.