Paying Your Delaware Franchise Taxes
Flat Fees and Taxes
Some entities such as foreign corporations, domestic and foreign limited liability companies, limited partnerships, and general partnerships formed in Delaware pay a flat fee or annual tax without more. The flat fees/taxes are generally low, simple, and require no further calculations. For example, foreign corporations must file an Annual Report with a $125.00 filing fee by June 30. Domestic and foreign limited liability companies, limited partnerships, and general partnerships must pay an annual tax of $300.00. Remember that “domestic” here means that the company was formed in Delaware, and “foreign” means that the company was formed in a different state (not country).
Franchise Taxes
Domestic corporations* are a different matter altogether because in addition to its Annual Report ($50.00 paid by March 1), it must file franchise taxes. The amount of franchise taxes a corporation pays varies depending on several factors. The minimum franchise tax a corporation could pay is $175.00. This applies if the corporation authorized 5,000 shares or less. The maximum franchise tax a corporation could pay is $200,000.00.
Franchise taxes can be calculated in two different ways: using the Authorized Shares Method or the Assumed Par Value Method.
The Delaware Division of Corporations explains that corporations having no par value stock can minimize their taxes using the Authorized Shares Method. However, the Authorized Shares Method results in lower taxes only if your corporation has authorized 20,000 or fewer shares.
These images were taken from the Delaware Division of Corporation website.
If your corporation has authorized more than 20,000 shares and the par value of the authorized shares is de minimus, then use the Assumed Par Value Capital Method of calculating your corporation’s franchise taxes. The minimum franchise taxes your corporation would pay using the Assumed Par Value Capital Method is $400.00. In this instance, it will not matter whether your company has 20,000 or 20,000,000 authorized shares. This method is generally proportional to the value of your company.
These images were taken from the Delaware Division of Corporation website.
Your Delaware registered agent will likely remind you of upcoming filing obligations every year, but you are still ultimately responsible for making timely filings and payments. Mark your calendars just like you do for your personal income taxes and check this item off your to-do list every year.
*Non-stock, for profit entities pay a flat franchise tax of $175.00. Foreign corporations pay a flat annual report fee of $125.00.
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