Incorporating in Delaware: the Delaware Corporate Franchise Tax

All corporations incorporated in the State of Delaware are required to file an Annual Franchise Tax Report and to pay a franchise tax. Taxes and annual reports are to be received no later than March 1 each year. The minimum tax is $30 with a maximum of $150,000.

CORPORATE ANNUAL REPORT

Annual reports for corporations are sent to the registered agents in December of each year. A $20.00 filing fee is required for the annual report. Annual reports or reprints may be requested through your registered agent.

LP/LLC/GP

All Limited Partnerships, Limited Liability Companies and General Partnerships formed in the State of Delaware are required to pay an Annual Tax of $100.00. Taxes for these entities are to be received no later than June 1 of each year.

How to Calculate the Franchise Tax in Delaware?

1) Authorized Shares Method:

3,000 shares or less (minimum tax) $30.00
3,001 - 5,000 shares $50.00
5,001 - 10,000 shares $90.00
each additional 10,000 shares or portion thereof $50.00

For example:

A corporation with 10,005 shares pays $140.00 ($90.00 + $50.00)
A corporation with 100,000 shares pays $540.00 ($90.00 + ($50.00 x 9))

2) Assumed Par Value Capital Method:

To use this method, you must give figures for ALL ISSUED SHARES (including treasury shares) and TOTAL GROSS ASSETS in the spaces provided on your Annual Franchise Tax Report. Total Gross Assets shall be those "total assets" reported on U.S. Form 1120, Schedule L (Federal Return) relative to the company's fiscal year ending in the calendar year of the report. The tax rate under this method is $200.00 per million or portion of a million of the assumed par value capital, which is calculated as described below, if the assumed par value capital is greater than $1,000,000. If the assumed par value capital is less than $1,000,000, the tax is calculated by dividing the assumed par value capital by $1,000,000 then multiplying that result by $200.00. The example cited below is for a corporation having 1,000,000 shares of stock with a par value of $1.00 and 250,000 shares with a par value of $5, gross assets of $1,000,000 and issued shares totaling 485,000.

Divide your total gross assets by your total issued shares carrying to 6 decimal places. The result is your "assumed par".

Example: $1,000,000 assets ¸ 485,000 issued shares = $2.061856 assumed par

Multiply the assumed par by the number of authorized shares having a par value less than the assumed par.

Example: $2.061856 assumed par x 1,000,000 shares = $2,061,856

Multiply the number of authorized shares with a par value greater than the assumed par by their respective par value.

Example: 250,000 shares x $5.00 par value = $1,250,000

Add the results of #2 and #3 above. The result is your assumed par value capital.

Example: $2,061,856 + 1,250,000 = $3,311,856 assumed par value capital

Figure your tax by dividing the assumed par value capital, rounded up to the next million if it is over 1,000,000, by 1,000,000 and then multiply by $200.

Example: 4 x $200 = $800.00

NOTE: If an amendment changing your stock or par value was filed with the Division during the year, issued shares and total gross assets within 30 days of the amendment date must be given for EACH PORTION of the year during which each distinct authorized amount of capital stock or par value was in effect. The tax is then prorated for each portion of the year by dividing the number of days the stock/par value was in effect by 365 days (366 for a leap year), then multiplying this result by the tax calculated for that portion of the year. The total tax for the year is the sum of all of the prorated taxes for each portion of the year.

Taxes due will be based on the "Authorized Shares Method" and is printed on the Annual Franchise Tax Report each corporation receives annually. If, when filing the Annual Franchise Tax Report, you select the "Assumed Par Value Method", please follow the calculation instructions above to confirm the tax due. To verify the tax balance due, please contact 302/739-3073 and ask for the Franchise Tax Section.

If you need more information about Delaware taxes, please visit the Department of Finance site at http://www.state.de.us/revenue/