Discover everything you need to know about the Delaware Franchise Tax – what it is, who needs to pay, how much you'll pay, and essential details on deadlines and payment methods.
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In case you missed it, It's tax season in the United States. 😩
If you've incorporated in Delaware, you'll have yearly filing obligations to take care of – one of them being the Delaware Franchise Tax.
Wondering what the Delaware Franchise Tax is, if you're subject to it, and how to pay it? We've prepared this quick post with As to all your Qs.
The Delaware Franchise Tax is a fee that businesses pay to Delaware for being incorporated in the state. It's essentially an annual tax that helps fund state services and infrastructure.
Even if you don't operate in Delaware or the US, you'll still be required to pay this tax, but the amount will depend on the type and size of your business.
It's important to pay the Delaware Franchise Tax on time to avoid penalties and maintain good standing with the state.
If you're incorporated in the state of Delaware, you do – this includes all C-Corps, LLCs and S-Corps, even if you're not doing business there at all.
The amount you'll pay for the Delaware Franchise Tax depends on the type of business you have. For corporations, the tax is calculated based on the number of authorized shares and the par value of stock. The minimum tax for most corporations is $175, but larger corporations with more shares or higher par value might pay more. You can use this calculator to estimate your taxes.
For LLCs, the Delaware Franchise Tax is a flat fee of $300.
It's important to note that these amounts can change, so it's always a good idea to check with the Delaware Division of Corporations or your tax advisor for the most up-to-date information.
You can pay for your Delaware Franchise Tax by logging in to the Delaware Franchise Tax Payment Portal and following this step-by-step process:
Alternatively, you can also work with a Delaware registered agent to make this payment on your behalf.
You can check the status of your Delaware Franchise Tax by logging into the Delaware Franchise Tax Payment Portal and following the same step-by-step as you would when making a payment. Before you're asked to pay, you'll see a summary view of any amounts owed for current and previous tax years – if there's a zero right next to the year you're checking for, this means you've already paid.
If you fail to meet the filing deadline, you'll be subject to a $200 late penalty, and a monthly interest fee of 1.5% for each month you're late. Not paying the Delaware Franchise Tax means you'll lose your good standing with the state of Delaware and be subject to fines, unable to file lawsuits, and prevented from doing business in other US states.
If you fail to pay the Delaware Franchise Tax and file the Annual Report for two consecutive years, your company will be dissolved by the state of Delaware.
There's no need to panic if you missed the Delaware Franchise Tax deadline, but you should act promptly to avoid penalties – you can settle your balance following the exact same process you would before the due date.
The Delaware Franchise Tax Payment Portal will have an updated balance for you including any penalties and interest, which you can check by logging in.
Try to submit your payment as soon as possible, including any late fees and interest charges, to ensure your account is up to date. The sooner you pay, the less exposure you'll have to cumulative penalties, and the less likely you are to face potential consequences for your business's good standing.
If you're unsure about the exact steps or need assistance, consider reaching out to your tax advisor, or contacting the Delaware Division of Corporations for guidance.
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