Most of us know that April is the month when we file personal income tax returns with the Internal Revenue Service. For business owners who come to the State of Delaware for low incorporation and annual fees (no Delaware Income Tax for companies that run outside Delaware), they reach another important compliance deadline. 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.
What is the Delaware LLC franchise tax and what does it cost?
Each year, Delaware Limited Liability Companies, Limited Partnerships, and General Partnerships pay a franchise tax of $300 by June 1st to remain in good standing with the Division of Corporations. Payment information and a payment voucher are sent to the Delaware Registered Agent. It’s important your Delaware Registered Agent has the correct contact information so they can provide you with a timely notice.
What happens if I don’t pay my Delaware Limited Liability Company franchise tax?
Failure to pay the franchise tax by the deadline will result in $200 penalty and interest charges assessed by the State of Delaware at the rate of 1.5% a month. It will also prevent the business from getting a certificate of good standing and may eventually lead to your business declared void by the State. To be compliant, be sure to: (1) have a Delaware Registered Agent, and (2) pay the Delaware Limited Liability Company franchise tax as soon as possible! If you did not file a certificate of cancellation for your business by December 31, 2017, then you need to pay the annual franchise tax to the State of Delaware to remain in good standing.
Do other business entities that incorporate in Delaware pay a Delaware franchise tax?
It’s not just Limited Liability Companies, Limited Partnerships, and General Partnerships that pay the Delaware franchise tax. Corporations formed in Delaware (regardless of where they conduct business) pay a franchise tax and file an Annual Franchise Tax Report in exchange for the privilege of forming a business in Delaware
What is the franchise tax and annual report cost for Delaware Corporations?
The Delaware franchise tax for Corporations can vary depending on the number of stock shares, the number of stock shares issued, and their par value. The minimum tax ranges from $175 to $400 depending on specific circumstances. A Delaware Corporation’s franchise tax is the lesser of the two amounts under the authorized shares and assumed par value capital method calculated using total gross assets, not income. There’s an added fee of $50 to file the annual report. Therefore, the minimum Delaware franchise tax and annual report payment total is $225 a year for Delaware domestic corporations.
Does my Delaware Corporation have to file an annual report?
All businesses formed in Delaware, including tax-exempt businesses, need to file an annual franchise tax report by March 1st of each year, and pay a filing fee of $50. 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.
What happens if I don’t pay the Delaware franchise tax and file an annual report for my Delaware Corporation?
If a domestic corporation does not file an annual report or pay the franchise tax by March 1st, the Delaware Division of Corporations assesses a penalty of $125. An added penalty of 1.5% applies to the unpaid balance each month until paid in full. Also, the business will no longer be in good standing. This means the Delaware Division of Corporations will not issue a certificate of good standing for the business. Owners of Delaware corporations should be sure to: (1) pay your annual franchise tax, (2) file a, annual franchise tax report for your business, and (3) keep a Delaware agent registered.
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.