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If Your Business is a Delaware Corporation, There Are Important Upcoming Tax Deadlines to Be Aware Of

When starting a business, many entrepreneurs choose to incorporate in Delaware for a wide range of different reasons. Chief among them are the tax-related benefits, like the fact that if you're registered in the state but don't do business there, you don't have to deal with state corporate income tax. Delaware also has a reputation for protecting a business' privacy, allowing a slimmed-down corporate structure, and having all filings processed quickly and easily, among others.

But as tax season rolls around yet again, there are important deadlines to be aware of - with March 1, 2023, being chief among them. This is when the Delaware Corporation Franchise Tax deadline is occurring - something to pay attention to for many important reasons.

The Delaware Corporation Franchise Tax Deadline: Breaking Things Down

At its core, the Delaware Corporation Franchise Tax is one imposed by the state of Delaware that essentially gives you the "right" to own a company based in the state. It doesn't impact the amount of money you can bring into a said company or any other related activities. Instead, it is simply required so that your organization's status within Delaware remains in "good standing" moving forward.

It's equally important to note that, despite its name, the Delaware Corporation Franchise Tax does not mean that your company is suddenly a literal franchise.

In addition to the tax itself, your company will need to submit what is known as a Delaware annual report. This outlines a number of core aspects of your business, including but not limited to things like:

  • The address of your business's physical location.

  • The name, address, and other relevant contact information of at least one officer within your company.

  • The names, addresses, and other relevant contact information of any corporate directors that may be present.

Note that you will need to submit this report every year, even if absolutely nothing has changed about any of the above factors in the last 12 months. Both the tax payment and the annual report need to be filed no later than March 1.

What is the Delaware Franchise Tax Based On?

Overall, the amount of tax that you will pay under the Delaware Franchise Tax will never be lower than $175.00, but will never exceed $200,000.00. Obviously, there is a fairly significant gap between those two numbers - the actual amount that you pay will be based on one of two distinct calculations.

The first of those is called the "Authorized Shares Method." If yours is a business that has no par value stock, you will pay based on the following brackets:

  • If you have 5,000 shares or fewer, you will pay the minimum of $175.00.

  • If you have between 5,001 and 10,000 shares, that number increases to $250.00.

  • For every additional 10,000 shares, you add $85.00 to the total.

  • Once you get to $200,000.00, that is the highest amount of money that you will pay.

The other method is called the "Assumed Par Value Capital Method." If you're going to be using this method, you need to include the values of all issued shares along with your total gross assets on the aforementioned annual report. When calculating using this method, you will pay $400.00 for every million (or part of a million) that you are dealing with.

How to File the Delaware Franchise Tax

Thankfully, the process of filing the Delaware Franchise Tax is straightforward. First, you'll visit the state's official website and select the option labeled "Pay Taxes/File Annual Report."

At that point, you will be asked to provide identifying information like your Business Entity File Number. Do so and select "Continue."

Then, choose the option labeled 'File Annual Report." Select which of the two aforementioned methods that your calculation will be based on. Note that in most situations, people are better off choosing the Assumed Par Value Capital Method.

Then, enter all the information that you are asked into the boxes on screen. That will include your issued share count, your gross assets, and more. Once you have reviewed everything you entered for accuracy, you can pay the Delaware Franchise Tax via the website using your payment method of choice.

To find out more information about the Delaware Franchise Tax, or to get help with related matters from a financial professional, please don't delay - contact us today.

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