It’s that time of year again. Delaware domestic for-profit, nonprofit, and benefit corporations should have received notices of franchise taxes and annual reports due for the 2021 tax year from their registered agent.
To help your Delaware corporation annual report filing process go smoothly, we’ve got some answers to the most frequently asked questions we receive this time of year.
Delaware domestic corporations must file a fully completed annual report and pay both the annual report filing fee and franchise tax by Tuesday, March 1st, 2022. The Franchise Tax Department will be available to assist on Saturday, February 26th, by email and chat from 8 am to 4 pm.
Keep in mind this franchise tax payment due is for the prior (2021) calendar year. Exempt corporations do not have to pay franchise tax but are still required to file a completed annual report and pay the report filing fee by the Delaware annual report due date.
The report must be filed online and received by the Division of Corporations on or before March 1st.
Your Delaware corporation annual report is pre-populated with certain information, including the exact legal name of the entity, the total number of authorized shares, the class and par value of the shares, and a breakdown of the franchise tax and fees due. The annual report is also required to include the principal business address and phone number, the names and addresses of all directors, and the name and address of one officer. It must be executed by an authorized signer.
The Delaware corporation annual report must be signed by the corporation's president, secretary, treasurer, or other duly authorized officer or by any of its directors. If filing an initial report, any incorporator can be an authorized signer in the event the board of directors has not yet been elected. Keep in mind that incorporators may not sign subsequent annual reports.
There are two methods to calculate a corporation’s Delaware franchise tax fee: Authorized Shares method and Assumed Par Value Capital Method. The corporation pays the lesser of the two amounts, as calculated below.
If a corporation has 5,000 shares or less, it pays the minimum tax of $175. For corporations with 5,001 to 10,000 shares, the tax is $250. For corporations with over 10,000 shares, the tax is $250 plus $85 for each additional 10,000 shares (or portion thereof) to a max annual tax of $200,000.
To use this method, a corporation must report its total number of issued shares (including treasury shares) and total gross assets listed on Schedule L (Form 1120) for the company’s fiscal year ending the calendar year of the report.
For corporations using the Assumed Par Value Method, the minimum tax is $400. The tax rate using this method is $400 per $1,000,000 (or part thereof) of assumed par value capital, with a maximum annual tax of $200,000.
The Delaware Division of Corporations provides additional information on calculating the tax due, including an annual franchise tax calculator that helps estimate a corporation’s Delaware franchise tax fee using either the Authorized Shares method or the Assumed Par Value method. While a 2021 calculator is not posted on the Delaware Secretary of State site, we have confirmed that the 2018 calculator can be used for the 2021 tax year.
The Delaware Secretary of State charges an additional filing fee of $50 for a Delaware corporation annual report. Exempt corporations pay $25 to file an annual report.
All non-exempt non-stock corporations pay a franchise tax of $175. There is no alternate tax method available.
Title 8 Section 503 of the Delaware Code includes provisions for large corporate filers. This section provides that in each calendar year, the Secretary of State shall compile a list of corporations that had:
These large corporate filers pay an annual franchise tax of $250,000 instead of $200,000 and are required to pay their franchise taxes on a quarterly basis.
Taxpayers owing $5,000 or more pay estimated taxes in quarterly installments with 40% due June 1st, 20% due by September 1st, 20% due by December 1st, and the remainder due March 1st. Taxpayers subject to the quarterly payment requirement will receive a reminder notice each quarter.
Note that only one Delaware annual report is required to be filed by March 1st, even for corporations paying quarterly franchise taxes.
A corporation may pay its franchise taxes directly via Delaware SOS ACH. This method must be used for all transactions over $5,000. If you prefer to make your payment via wire transfer, check with your registered agent since most professional registered agent companies will accept the funds by wire, pay the Delaware Secretary of State and follow up with evidence of such payment on behalf of your corporation.
Corporations that do not file a Delaware annual report by March 1st are assessed a $200 penalty plus interest at 1.5% per month applied to any unpaid tax balance, in addition to the original tax and annual report fee.
It is important to note that Delaware will not issue Good Standing Certificates for corporations that have not met the annual report filing requirements.
After two years of non-filing and non-payment of the Delaware LLC annual fees, the corporation’s Certificate of Incorporation will be revoked.
Yes. You are still required to file the Delaware annual report and pay the Delaware corporation tax (franchise tax) even if the corporation never engaged in business.
Delaware requires that annual report(s) be current prior to all dissolution and merger filings. At the time of dissolution or merger, all franchise taxes must be paid through the date of the filing of the Certificate of Dissolution or Merger with the Delaware Secretary of State.
This lesser-known requirement can be quite frustrating when it delays time-sensitive filings. We recommend identifying the tax due in these cases well in advance of the date of filing for a dissolution or merger. A professional registered agent company can assist with identifying total taxes due on any given date when you are handling a merger or dissolution.
Delaware now requires that all annual franchise tax reports be filed electronically and accepts payment only in U.S. dollars drawn from U.S. banks. You have the following options to file your report and pay taxes and fees:
*If COGENCY GLOBAL is your registered agent, contact us to gain access to our online Delaware Annual Report filing system.
Yes, you can file an amended annual report for $50. Delaware allows one year to amend the annual report. (Several amended reports can be filed within that year).
Have any more questions about Delaware's annual reporting and corporate tax obligations? Let us know!
This content is provided for informational purposes only and should not be considered or relied upon as legal advice.