Franchise Taxes Overview
Franchise Tax Reports for Delaware corporations are due annually by March 1.
The word “franchise” is often associated with restaurants and retail outlets—but franchise taxes, which are due annually to the Delaware Secretary of State, are a completely different subject matter. The Delaware Division of Corporations explains it this way:
Any corporation that is incorporated in Delaware (regardless of where you conduct business) must file an Annual Franchise Tax Report and pay Franchise Tax for the privilege of incorporating in Delaware.
Bottom line - if you’re incorporated in Delaware (and if you're a Shoobx client, you are!), you must file an Annual Franchise Tax Report.
The deadline for this filing is March 1. Mark your calendar with this important filing date to avoid penalties—missing the deadline means a penalty of $200 or more, and the interest on the unpaid tax balance accrues at a rate of 1.5% per month. If you fail to file the report for two years in a row, Delaware will revoke your company’s Charter.
There are two methods for calculating franchise taxes:
- Authorized Shares Method - For corporations having no par value stock, the authorized shares method will always result in the lesser tax.
- Assumed Par Value Capital Method - This method requires figures for all issued shares (including treasury shares) and total gross assets.
Because the calculations for each of the methods are different, the amount of tax due will vary. Delaware lets you choose the method that is most advantageous to your company, and you may want to consult with your accountant and/or attorney to determine which method is best for your company.
The State of Delaware has two tools available to assist in calculating taxes due, both using either the Assumed Par Value Capital Method or the Authorized Shares Method. The Delaware tax calculator will produce an estimate of the taxes due. The How to Calculate Franchise Taxes page will describe the calculation instructions for using the Assumed Par Value Capital Method and the Authorized Shares Method.
Then move on to the DE Annual Report and Tax Instructions page to file your Annual Report and pay your taxes.
If you have questions, Delaware offers a Franchise Tax FAQ to help, and your accountant and attorney can also provide useful guidance. Remember: most companies that incorporate in Delaware actually operate in another state (or states). You will need to file an annual report and/or pay associated taxes and filing fees in every state where your company is registered to do business as a foreign corporation. Filing deadlines vary but can be found on each state’s Division of Corporations website, like California, Massachusetts, and New York, just to list a few. Be sure to mark your calendar to file all your reports on time!
Having Shoobx File Your Delaware Annual Report and Pay Your Franchise Tax
Shoobx can file your Delaware annual report and pay your franchise tax on your behalf, or you can choose to file the Annual Franchise Tax Report on your own, or you can partner with a registered agent, attorney, or accountant. If you elect to file through Shoobx, you must submit your request to Shoobx via the Annual Franchise Tax workflow (described below) no later than February 14th. For this transaction to be finalized on Shoobx, payment must be completed by February 21st.
As a reminder, your company also has tax and/or filing obligations in every state that you are registered to do business in as a foreign corporation, and Shoobx does NOT file annual reports and/or pay associated taxes in foreign states on your behalf.
If you choose to have Shoobx file your Delaware annual report, The "File Delaware Annual Report and Pay Franchise Tax" workflow will allow you to kickstart this process. Shoobx will file your Delaware annual report and help you pay your franchise tax through CSC. You'll find this workflow under the "Government Filing" section of workflows. The first page of this workflow will provide you with an overview of the process and necessary fees.
Article is closed for comments.