Delaware Annual Report and State Tax Requirements
Maintain your Delaware entity's good standing. Our guide clarifies annual report and franchise tax obligations, including how to find your lowest tax amount.
An annual filing is a mandatory obligation for nearly all business entities registered in Delaware. This process is necessary to maintain a company’s “good standing,” a status confirming legal compliance with state requirements. Without good standing, a company may face difficulties securing financing or entering into contracts. The specific requirements, including the report type and tax amount, differ based on the business’s legal structure. These obligations apply to any entity incorporated in Delaware, regardless of where it physically conducts business.
Annual Filing and Tax Obligations by Entity Type
The type of business entity you operate dictates your specific annual obligations to the State of Delaware.
Corporations (Stock and Non-Stock)
All corporations in Delaware must file an Annual Report with the Division of Corporations by March 1st. For-profit (stock) corporations must also pay an annual franchise tax and a $50 filing fee with their report. Exempt domestic corporations, such as non-profits with charitable, educational, or religious purposes, also file by March 1st but do not pay franchise tax. These exempt corporations pay a reduced filing fee of $25.
Limited Liability Companies (LLCs), Limited Partnerships (LPs), and General Partnerships (GPs)
Limited Liability Companies (LLCs), Limited Partnerships (LPs), and General Partnerships (GPs) do not file an Annual Report. Instead, these entities must pay a flat annual tax of $300 by June 1st each year. This tax is not based on the company’s shares or assets. Failure to pay by the deadline results in a $200 penalty, with interest accruing at 1.5% per month on the combined tax and penalty.
Calculating the Delaware Corporation Franchise Tax
For-profit corporations can use one of two methods to calculate their annual franchise tax, paying the lower amount. The minimum tax is $175 with the Authorized Shares method and $400 with the Assumed Par Value Capital Method. The maximum tax is $200,000, but can be $250,000 for Large Corporate Filers.
To calculate the tax, a corporation needs:
- The total number of authorized shares from the certificate of incorporation
- The par value of the shares
- The total number of issued shares
- The value of total gross assets from Schedule L of the prior year’s U.S. Form 1120
The Authorized Shares Method
The Authorized Shares Method is a straightforward calculation based on the number of shares a corporation is authorized to issue. The tax is tiered based on the number of authorized shares. For a corporation with 5,000 or fewer authorized shares, the tax is $175. For corporations with 5,001 to 10,000 authorized shares, the tax is $250. For every additional 10,000 authorized shares over 10,000, the tax increases by $85. For example, a corporation with 20,000 authorized shares would pay $335.
The Assumed Par Value Capital Method
The Assumed Par Value Capital Method is more complex, based on a corporation’s assets and issued shares. It requires the total gross assets and all issued shares. The first step is to calculate the “assumed par” by dividing total gross assets by the total number of issued shares. This assumed par is then used to determine the “assumed par value capital.” If a corporation has shares with a stated par value, the calculation must account for the different values across stock classes. The tax is calculated at a rate of $400 for each $1,000,000 of the assumed par value capital, with a minimum tax of $400.
Choosing the Right Method
A corporation can calculate its franchise tax using both methods and pay the lower amount. The Delaware Division of Corporations provides an online franchise tax calculator to help determine the liability under both methods. This tool allows filers to input their financial data to see which method is more favorable before filing.
How to File the Annual Report and Pay the Tax
Delaware has streamlined the filing and payment procedure, primarily encouraging online submissions.
Online Filing and Payment
Corporations must file their Annual Report and pay taxes electronically through the Delaware Corporations Information System on the Division of Corporations’ website. You will need your company’s seven-digit business entity file number, which can be found using the state’s online search tool. The system guides you through the Annual Report form, where you must verify or update the corporation’s principal place of business, the names and addresses of all directors, and at least one officer.
Payment can be made through the portal by ACH debit or credit card.
- Visa
- MasterCard
- American Express
- Discover
Filing and Paying by Mail
LLCs and LPs can pay their flat annual tax through the same online portal used by corporations. While online filing is standard, payment by mail may be an option; contact the Division of Corporations for correct forms and procedures. If mailing, include the required form or voucher with a check made payable to the “Delaware Secretary of State.” Mail payments to the state’s processing center at P.O. Box 5509, Binghamton, NY 13902-5509.
After You File
After a successful online submission and payment, you will receive an electronic confirmation to save for your records. Once the state processes the filing, which can take several days during peak times, you can verify your company’s status. Use the business entity search on the Division of Corporations’ website to confirm your company is listed in “good standing.”