How do I calculate the Delaware franchise tax? Clerky

The second reason is bad bank accounts, such as using the wrong bank account on tax filings or not informing your accountant of changes in bank accounts, which can delay tax filings and result in late fees. Don’t panic – your Delaware Franchise Tax is likely so high because your accountant has used the wrong calculation method. Use the calculation method in our estimator above to estimate how much you likely owe. Your company will likely need to use the assumed par value calculation method instead of the authorized share method of calculation. If you’ve authorized 5,001 to 10,000 shares, your franchise tax is $250.

• It should be noted that the calculator is primarily intended for stocks with a par value, and taxes will be calculated using the Authorized Share Method.
• You’ll also pay 1.5% per month applied against any unpaid tax and penalty.
• If your corporation has not issued any shares, you are still required to pay a minimum franchise tax based on the number of authorized shares.
• A large percentage of businesses under the assumed par value method, will simply owe the minimum tax under this calculation, or $350.00.
• The Delaware Franchise Tax is an annual tax imposed on businesses incorporated in Delaware or have a presence there.

Any changes to these details typically require an amendment to the Certificate of Incorporation. Missing the due dates results in a $200 penalty, with interest on the overdue amount (including the penalty) accruing at 1.5% per month. This can significantly increase the financial burden for businesses that delay their payments.

The Delaware Division of Corporations is the administrative body charged with enforcing and collecting the franchise tax. Corporations formed in Delaware must file an Annual Franchise Tax Report and pay the franchise tax—even if no business was conducted, no income was earned, and no shares were issued. The requirement underscores that franchise tax is a cost of corporate existence and good standing in the State of Delaware.

Franchise Tax in Delaware: How to Calculate and Pay

• You will need to take the Total Gross Assets (most likely to be your total cash balances, but can also include any intercompany investments or loans).
• For more help with tax and compliance matters, see How can my corporation get help complying with Delaware’s requirements?.
• Not paying the Delaware Franchise Tax and failing to file the Annual Report for two consecutive years will lead to the State of Delaware’s automatic administrative dissolution of the corporation.
• Companies are also obligated to file an annual report, which goes hand-in-hand with the payment of franchise tax, to ensure the accuracy of the entity’s information on record.

It’s important how do i compute the delaware franchise tax for founders to remember that the Delaware Franchise Tax website defaults to the largest tax bill possible when you first log into the site. That’s because the state of Delaware doen’t know how many outstanding shares you have or what your asset base is until you fill out that information. If you’re not working with an accounting firm, you’ll need to total up your asset base and enter that number.

The DE franchise taxes and annual reports are due no later than March 1st of each year. For limited partnerships, limited liability companies, and general partnerships formed in Delaware, the annual tax is due on or before June 1st of each year. The Annual Franchise Tax Report and payment for the prior year must be submitted by March 1st annually. Failure to file the report and pay the required franchise taxes by the due date will incur a penalty of $200.00, in addition to a 1.5% interest per month on both the tax and penalty.

The tax rate under this method is $400.00 per million or portion of a million. If the assumed par value capital is less than $1,000,000, the tax is calculated by dividing the assumed par value capital by $1,000,000 then multiplying that result by $400.00. For C-Corporations, including VC-backed startups that Kruze proudly serves, the Delaware franchise tax and annual report filings are due by March 1st every year. It’s a critical deadline that these corporations must meet to avoid incurring late fees.

When is the deadline for paying Delaware franchise tax?

It should be noted that the calculator is primarily intended for stocks with a par value, and taxes will be calculated using the Authorized Share Method. In Delaware, corporations are subject to the Franchise Tax, which is administered by the Delaware Department of State. It is important to note that corporations incorporated in Delaware but not conducting business in the state are not subject to corporate income tax, as per 30 Del.C, Section 1902 (b) (6).

When are Delaware franchise taxes due?

Our team is ready to learn about your business and guide you to the right solution. Bench simplifies your small business accounting by combining intuitive software that automates the busywork with real, professional human support. 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.

By default, Delaware sends out your tax bill using the authorized shares method, which will often be the higher of the two, which is why the tax notice that you receive can be so ridiculously high. Divide your total gross assets by your total issued shares carrying to 6 decimal places. The minimum tax for companies using the Authorized Shares Method is $175, and the maximum annual tax is $200,000. We’ve seen startups get a huge tax bill when this calculation method is used; let’s do an example of a typical, venture backed startup.