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Delaware Corporations: Annual Franchise Tax is Due March 1

Delaware Annual Report

By Sandra B. Feldman, Publications Attorney for CT Corporation.

If you are the owner or compliance officer of one of the hundreds of thousands of business corporations that call Delaware home you should know this: 

Your corporation has to file its annual franchise tax report and pay its annual franchise tax by Wednesday, March 1, 2017.

Who Has to File and Pay?

Every for-profit corporation incorporated in Delaware is subject to the annual franchise tax requirement.  The corporation does not have to be doing business in Delaware or earn any income there.  

CT Tip: Think of this as a license fee.  You are paying for the right to incorporate and exist as a Delaware corporation. Non-profit corporations are exempt from paying the franchise tax. However they still have to file an annual report by March 1. (The filing fee is $25.)

 

How Much Does My Corporation Have to Pay?

A corporation has to pay a $50 filing fee plus the franchise tax.   The franchise tax can be calculated based on one of two methods.  

CT Tip: The corporation can use whichever method results in the lower tax.

Method #1 is called the “authorized shares” method.  The minimum tax due under this method is $175 and the maximum is $180,000. The tax due depends on the number of authorized shares (that's the maximum number of shares the corporation can issue as set forth in its certificate of incorporation).  It is calculated as follows:

  • 1 to 5,000 shares: $175

  • 5,001 to 10,000 shares: $250

  • Each additional 10,000 shares or portion thereof add $75

CT Tip: For shares without par value, Method #1 has to be used.​

Method #2 is called the “assumed par value capital” method.  The minimum tax is $350 and the maximum tax is $180,000. The tax rate under this method is $350 per $1 million (or portion thereof) of assumed par value capital.

CT Tip: Method #1 is the default method, meaning that the state calculates the tax using that method and lists the amount due on its notice.  However the corporation can recalculate using Method #2 and pay that amount if it is lesser.
 

What About the Annual Franchise Tax Report?

The information set forth on the report includes:

  1. The registered agent and registered office,

  2. The principal place of business,

  3. The number and par value of authorized shares and

  4. The names and addresses of all the directors and

  5. The name and address of the officer who signs the report.

CT Tip: The report must be filed online.

What Are the Penalties for Non-Compliance?

There is a $125 penalty for failure to file the report by the due date.  Corporations that neglect or fail to pay the franchise tax, or to file a complete franchise tax report, for more than one year will have their charters voided.

CT Tip: Failing to file a complete annual report, or pay any franchise tax due, risks more than the $125 penalty. It also risks the loss of good standing and could jeopardize a corporation’s right to exist as a Delaware corporation.
 

What Should I Do if I Haven't Complied Yet?

Contact CT Corporation for assistance.
 
Updated for 2017 due dates.
Originally published in February, 2015.

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