Delaware Annual Filings: Franchise Taxes and Annual Reports

Delaware annual filings are essential for businesses incorporated in the state, ensuring compliance and maintaining good standing. This guide provides an overview of the filing requirements, key deadlines, and the steps involved to ensure accurate and timely submissions.

What are Delaware Annual Filings?

Delaware annual filings consist of two key components:

1. Annual Report
2. Franchise Tax Payments

These filings are mandatory for all Delaware-incorporated businesses and provide the Delaware Division of Corporations with updated information about directors, officers, and business activities. These reports are crucial for maintaining a corporation's legal status and the ability to operate within and outside Delaware.

Who Needs to File Delaware Annual Filings?

• Corporations:
  All Delaware-incorporated corporations (C-Corps and S-Corps) are required to file an Annual Report and pay Franchise Tax.
• LLCs, Partnerships, Non-Profit Organizations:
  While these entities may have different requirements, they often have specific annual filing obligations as well.

Why Are Delaware Annual Filings Important for Your Business?

1. Maintaining Good Standing:
   These filings are necessary to retain credibility and operational permissions.
2. Compliance:
   Filing on time prevents penalties, interest, and potential dissolution of the business.
3. Operational Integrity:
   Ensures that the state's records reflect the current structure and contact information of your business.

When Are Delaware Annual Filings Due?

• Corporations:
  Must file their Annual Report and pay Franchise Tax by March 1st each year.
• LLCs, Partnerships, and Other Entities:
  Typically have deadlines on June 1st.

Failure to meet these deadlines can result in penalties and interest charges.

How to Fill Out Delaware Annual Filings

1. Access the Delaware Division of Corporations Website:
   Go to the official website and locate the Annual Report and Franchise Tax payment section.
2. Complete the Annual Report:
   Provide accurate information about directors, officers, and business activities.
3. Calculate Your Franchise Tax:
   Use the online calculators to determine the tax owed based on the type of corporation and the number of shares.
4. Submit and Pay:
   File the Annual Report online and complete the payment process before the deadline.

Common Mistakes in Delaware Annual Filings

1. Late Submissions:
   Missing the filing deadline typically incurs penalties and interest.
2. Inaccurate Information:
   Incorrect details about directors or officers can delay processing and may require an amended report.
3. Incorrect Tax Calculations:
   Errors in calculating Franchise Tax can lead to underpayment or overpayment, with the former possibly resulting in interest or penalties.

Step-by-Step Guide to Delaware Franchise Tax Calculation

Delaware’s Franchise Tax can be calculated using two methods:

1. Authorized Shares Method
   This method is simpler and is based on the number of authorized shares. It’s suitable for most startups.
2. Tax Rates:
   5,000 shares or less (minimum tax): $175.00
   5,001 to 10,000 shares: $250.00
   Each additional 10,000 shares or portion thereof: add $85.00
   Maximum annual tax: $200,000.00

Example Calculations:‍

Corporation with 10,005 shares: $335.00 ($250.00 + $85.00)
Corporation with 100,000 shares: $1,015.00 ($250.00 + $765.00 [$85.00 x 9])

Assumed Par Value Capital Method
Corporations with no par value stock often benefit from this method, as it generally results in a lower tax.

Online Calculator:
Use Delaware’s online calculator to determine the tax, ensuring you input accurate values for assets and shares.

How to Amend Delaware Annual Filings

If you need to correct or update your Delaware annual filings, follow these steps:

1. Visit the Delaware Division of Corporations Website:
   Navigate to the relevant section for amendments.
2. Download and Submit the Certificate of Correction Form:
   This form is used to correct corporate documents (not for annual tax filings). Submit the form along with any required fees.
3. File Before the Next Deadline:
   Ensure all corrections are made before the next deadline to avoid penalties.

‍

Book a free Delaware compliance consultation with Commenda