All corporations incorporated in the State of Delaware are required to file an Annual Report and to pay a franchise tax. Delaware franchise tax is a tax charged by the state of Delaware for the right to own a Delaware company. The tax is not based on revenue, income or company profit. The tax is required to maintain the company’s good standing in Delaware. The term franchise can sometimes be confusing, it does not mean your company is involved in a franchise business model. All corporations registered in Delaware pay the Tax, regardless of their business income, business model or company structure.
Delaware Franchise Tax Filing
Delaware tax filing is mandatory and corporations have the option to use either of two methods
- The Authorized Share Method
This is the first method that is typically used to calculate tax. The minimum tax for corporations using this method is $175. This method is great for corporations with low share capital. However, tax due using this method can be overly excessive especially if the corporation has a large share capital.
| Authorized Shares | | Tax fee |
| Less than or equal to 5,000 | | $175 tax + Annual Fee |
| 5,001 – 10,000 | | $250 + Annual Fee |
| Additional 10,000 shares or portion thereof: | | Add $85 |
2. The Assumed Par Value Capital Method
To use this method, the company’s total gross assets and the total number of issued shares is used. The calculation used in this method is complex. Sidebrief is happy to offer a free personalized tax calculation using this method. The minimum tax for corporations using this method is $400.
DE Franchise Tax Due Date 2022
The taxes for corporations are due by March 1 of every year. If the tax is not paid on or before March 1, the state imposes a $200 late penalty, plus a monthly interest fee of 1.5%.
Why is my Delaware Franchise Tax so High?
Delaware allows you to pay the lower of the two methods. Delaware typically defaults to the authorized share capital method. This means that if you receive a high bill that was calculated under this method, you can request a recalculation using the second method.
How is DE Franchise Tax Calculated?
The tax is calculated using a of the methods explained above. Whichever method yields a lower tax can be used by any particular corporation. The following information is required when calculating the Delaware Franchise Tax.
- Authorized share capital
- Issued Share capital
- Total gross assets
Delaware provides a step by step guide on how this calculation can be done here.
What is the maximum Franchise Tax?
Maximum tax will depend on the method used by the corporation in calculating its tax obligation.
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