Is your business incorporated or formed in Delaware? If so, you have an annual filing requirement and, depending on your annual tax liability, may have estimated payment requirements. See below for additional information by entity type.
Corporations
Corporations incorporated in Delaware must file a Delaware Annual Franchise Tax Report and pay the applicable franchise tax no later than March 1 of each year. No extensions are allowed. The report is required to be filed annually through the Delaware website (https://corp.delaware.gov/paytaxes/).
There are two methods of computing the Delaware annual franchise tax – Authorized Shares Method and Assumed Par Value Method. Both methods use authorized shares in the computation. For that reason, a general tax minimization strategy is to keep the number of authorized shares at a minimum. Follow this link for information on calculating the franchise tax and for a franchise tax calculator https://corp.delaware.gov/frtaxcalc/.
Each method has a minimum tax ($175 if using Authorized Shares method and $400 if using Assumed Par Value method). Both methods have a maximum tax of $200,000 ($250,000 if the corporation is identified as a large corporate filer).
Corporations with a tax liability of $5,000 or more must make estimated payments. These payments are due as follows – 40% by June 1, 20% by September 1, 20% by December 1 and the balance due with the annual report by March 1.
If the report is not filed (and payment not paid) on or before March 1, a penalty of $200 is applicable along with interest at 1.5% per month on the unpaid balance.
Foreign corporations (i.e. those domiciled in another jurisdiction but registered or qualified to do business in Delaware) also have an Annual Report and $125 filing fee which are due on or before June 30. A $125 penalty will be added if the report and remittance are not received by the due date.
Partnerships and Limited Liability Companies (LLCs)
Partnerships and LLCs formed or registered in Delaware are required to pay an annual tax of $300 on or before June 1. These entities are not required to file an Annual Report. If payment is not paid by June 1, a penalty of $200 is applicable. Interest at 1.5% per month will be applied to the tax and penalty.
Payment for this annual tax is made through the Delaware website: https://corp.delaware.gov/alt-entitytaxinstructions/
These filing requirements are not considered income taxes, and, therefore, are not regularly considered a part of your tax engagement with Maxwell Locke & Ritter LLP. While we don’t normally file these for our clients, we are here to assist as needed. Contact us if you have questions on your Delaware filing requirements.
