Delaware Franchise Tax FAQ

The Delaware Secretary of State requires all corporations that are registered in their state to file a franchise tax report annually on or before March 1st.

If the corporation owed $5,000.00 or more the previous year, the state allows the entity to pay estimated taxes in quarterly installments with 40% due June 1, 20% due by September 1, 20% due by December 1 and the remainder due by March 1.

All Domestic and Foreign Limited Liability Companies, Limited Partnerships, and General Partnerships formed or registered in Delaware are required to pay an annual tax of $300.00 on or before June 1st. There is no requirement to file an Annual Report.

Missing any deadlines will result in penalties and interest that will accrue on a monthly basis until the amount that is owed is paid.

Each year United Corporate Services, Inc. receives inquiries about Delaware Franchise taxes, below are some of the most frequently asked questions.

QuestionWhere are my notices for payment sent and how can I get a duplicate?

Answer

Corporate Tax Notices are provided to the designated Registered Agent (United Corporate Services, Inc.) in December of that tax year. For example, the 2020 Tax Notices are provided to the Registered Agent in December of 2020 and the report is due by March 1, 2021. The Registered Agent is designated by the corporation through the initial formation or a subsequent filing. If United Corporate Services, Inc. is your Delaware Registered Agent and you require another copy of your notice, please contact registeredagent@unitedcorporate.com.

QuestionHow do I file my report?

Answer

Delaware requires your report to be filed electronically. You can file your report at the State of Delaware website or through our website at www.unitedcorporate.com and select DE Annual Report & Tax Payments found under the Client Tools and Resources tab. You will need your 7-digit file number to file at either site. If you would like UCS to file it on your behalf, complete the questionnaire on the back of your notice and email it to dover@unitedcorporate.com.

QuestionHow do I obtain my 7-digit file number?

Answer

A company search can be performed on the website of the Delaware Secretary of State to determine your 7-digit file number that was issued at the time of your initial formation. It can also be located on the tax notice or on the filed copy of the certificate of incorporation. You can contact United Corporate Services, Inc. at info@unitedcorporate.com for assistance locating your number.

QuestionWhat is a session ID?

Answer

A session ID is a unique identifier created at the beginning of the filing process. When filing through the State of Delaware’s website, a session ID is assigned in case you would like to pause your filing and continue at a later time.

To continue filing your annual report at a later time:

  • You may save your session by selecting “Save Session and Exit” at any time during your filing.
  • Once a Session ID is saved, both the Session ID and file number are needed to sign on to this session again.
  • The Session ID will be valid for a period of two weeks, however, can only be used once.

Note, when a Session ID is saved, the Annual Report is not considered filed. The Annual Report is considered filed once you select the “Submit Filing” button and the payment is received. An acknowledgment copy is then able to be viewed immediately and you may have a copy emailed to you.

QuestionMy company was formed on December 31st. Is the company required to pay taxes for that year even though it is only for a day?

Answer

Yes. The State of Delaware assesses a tax if you are incorporated for even a day. There are a minimum tax and annual report due for every entity. Click here for more information regarding minimum tax.

QuestionI operate a small business that has not generated a profit. Why is my tax so high?

Answer

The state assesses your tax based on the only information they have at the time which is your authorized shares. The more shares you have authorized the higher your assessed tax amount will be. However, the State provides an alternate method of calculating tax, called the Assumed Par Value method (or alternative method). This is based on your issued shares and gross assets. When filing your report, you must indicate that you would like to recalculate, by entering those figures. The system will then recalculate your tax due based on those numbers.

QuestionWhat does it mean to recalculate and when is it appropriate?

Answer

The state assesses your tax based on the total number of shares authorized. As stated in the answer above, a company can choose to recalculate their tax using an alternative method in an effort to reduce the amount of tax due. The alternative method (Assumed Par Value method) of calculating tax is based on the company’s issued shares and gross assets. When filing the report, the entity must enter those figures to recalculate and possibly reduce the tax due.

More details on Franchise tax calculations can be found here.

QuestionAlthough I incorporated my company it did not conduct business or issue any of its authorized shares last year. Is the company still required to pay taxes?

Answer

Yes, there is still a report due as well as a minimum tax.

QuestionIs the company still required to pay taxes if I plan to close it or have closed it recently?

Answer

Yes. Taxes continue to accrue on a corporation until a document is received and filed with the State of Delaware which terminates its existence there. Those documents include but are not limited to Dissolutions, Mergers, and Conversions.

QuestionCan I still file my taxes if my company does not have a Federal Identification number?

Answer

You may file your annual report and pay taxes without having a Federal ID#. This number is assigned by the Internal Revenue Service. If you need to obtain a Federal ID# for your entity, please visit the IRS website at www.irs.gov.

QuestionMy notice was sent to an old address, how can I update where my notices are sent?

Answer

You can contact our Registered Agent department at registeredagent@unitedCorporate.com or by calling 800-899-8648 Ext. 162.

QuestionDo I have to list all officers and directors of the company? What information should be included?

Answer

You must list the name and address of all directors as of the filing date of the report and the name and address of the officer who is signing the report.

QuestionWhich officers are authorized to file the report?

Answer

  • President
  • Secretary
  • Treasurer
  • Authorized Person (only if the officers have not yet been elected)
  • Incorporator if Board of Directors are not elected at the time of filing and directors or officers have not yet been elected.

QuestionWhere do I get my total gross assets?

Answer

The gross assets reported to Delaware should be the same as reported on Form 1120, Schedule L of your Federal return for that tax year.

For more information about Delaware Franchise Taxes, contact dover@unitedcorporate.com or speak with a member of our Delaware staff at (877) 734-8300. You can also watch this instructional video on our YouTube channel.