This article discusses how the tax is calculated, filing and payment due dates and other requirements applicable to for-profit C corporations that incorporate in Delaware. 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.
DELAWARE ANNUAL FRANCHISE TAX CALCULATION INSTRUCTIONS
For more help with tax and compliance matters, see How can my corporation get help complying with Delaware’s requirements?.
Annual Report Franchise Tax
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, a guide to basic accounting principles then the tax will be $250,000.00. Delaware Franchise Tax calculations are prorated if a corporation’s authorized and/or issued shares change during the year. Technology and life sciences companies that choose to incorporate in Delaware must pay an annual franchise tax.
Delaware Annual Franchise Tax Directions
- This is a person or a representative that is physically located in Delaware.
- However, in addition to incorporation, a corporation must be “doing business” in Delaware to be subject to the state income tax.
- Incorporating in a state usually creates income tax nexus with the jurisdiction.
- The minimum tax when using this method is $400, and the maximum tax is $200,000.
This option is fairly simple; 5000 shares or less you pay the minimum $175. If your DE Corporation has high value assets, the Assumed Par Value Capital Method is more complicated, but sets a cheaper tax fee. It is mandatory for Delaware Corporations to file their annual franchise taxes online. There are several variables that enter the Assumed Par Value Capital Method including the corporation’s gross assets, issued shares, number of authorized shares and their par value. Delaware provides a Microsoft Excel worksheet that can be used to show the tax based on various assumptions.
Calculating the Delaware Franchise Tax
The Assumed Par Value Capital Method in the above example results in a much how unearned revenue fuels growth lower tax ($26,800 vs. $170,165). Delaware would automatically show the higher tax due on their website using the authorized shares method. It is up to the taxpayer to select the Assumed Par Value Capital Method if it results in a lower tax.
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. Incorporating in a state usually creates income tax nexus with the jurisdiction. However, in addition to incorporation, a corporation must be “doing business” in Delaware to be subject to the state income tax. The above calculations must be done for each class of stock that is authorized by a corporation.
A corporation generally has one year from the date of filing to amend a Delaware Franchise Tax return and claim a refund. A refund might be available if the Assumed Par Value Capital Method was not considered. Taxpayers owing $5,000.00 or more must pay estimated taxes in a beginner’s tutorial to accountant credentials quarterly installments with 40% due June 1, 20% due by September 1, 20% due by December 1, and the remainder due March 1.