What is delaware franchise tax

Your notification of annual report and franchise tax due is sent to a corporation's registered agent in December or January of each year. Delaware requires these reports to be filed electronically.

Franchise taxes are generally due in arrears for the prior calendar year. There are two methods that you can use to calculate the amount of Delaware franchise tax due for your corporation the Authorized Shares Method and the Assumed Par Value Capital Method , which result in vastly different amounts due.

The default payment amount listed on your notification is set by Delaware using the Authorized Shares Method, which will almost always result in a much higher amount due for startups with limited assets. For corporations having No Par Value stock the authorized shares method will always result in the lesser tax:. However, if you have a large amount of shares with a par value, generally the Assumed Par Value Capital method may result in a considerably lower Franchise Tax.

To use this method, you must give figures for all issued shares including treasury shares and total gross assets in the spaces provided in your Annual Franchise Tax Report. Example 2 The calculation below is for a corporation having 2 classes of stock. Please Note The above calculation does not take in consideration an amendment changing your stock or par value filed with the Division of Corporations during the year.

Issued shares and total gross assets within 30 days of the amendment must be given for each portion of the year during which each distinct authorized amount of capital stock or par value was in effect.

The total tax for the year is the sum of all the prorated taxes for each portion of the year. If your business was formed or is located in another state but generates income in Delaware, you may need to pay Delaware taxes. If you own a business that operates in multiple states, you will greatly benefit from the knowledge of a tax professional. Multistate taxes and determining nexus can be very complicated.

The limited partnership or LP franchise tax is also due on June 1. This means that the tax due is for the previous calendar year.

You will also be charged a 1. For assistance, call this number: To reduce the taxes paid by a startup , use the Assumed Par Value method. This method calculates the taxes by total assets. As long as your issued shares constitute a third to half of your authorized shares, this method will save you money. If not, consider the Alternative Par Method.

Delaware franchise tax is due on March 1. An annual report is due at the time of filing the Delaware franchise tax. A tax haven or shelter is a method of reducing taxable income which results in a reduction of tax payment. The methodology of tax havens vary. A tax shelter can be created by an individual or a corporation. Delaware provides a favorable tax shelter for U. There are other states, such as Nevada, that also do this.

This leads to a high number of businesses being incorporated in those tax shelter states. Whether your business is physically in Delaware or not, you don't pay any state taxes. Delaware has no sales tax. The Delaware franchise and LLC tax is a flat fee.

Most states require a tax fee based on earned income. This means that Delaware tax is much lower than other states' LLC and franchise taxes. When filing a franchise tax in Delaware, all the must be submitted is the physical address of the business and the name of the registered agent. This can be a business owner or someone else.

By not requiring more information, businesses that file their franchise tax in Delaware can maintain privacy. The names of the owners, LLC members and managers are not required to be made public.