Filing Your Delaware Franchise Tax: A Detailed Guide

As a business owner in Delaware, staying on top of your tax obligations is paramount, especially with the annual deadline for Delaware Franchise Tax looming on March 1. One such obligation is the annual Delaware Franchise Tax, which serves as a crucial requirement for maintaining your company’s legal standing within the state. While the prospect of handling tax matters may seem daunting, rest assured that the process can be straightforward with the right guidance. In this comprehensive guide, we’ll walk you through the steps of filing your Delaware Franchise Tax and provide insights to help you navigate the process effectively.

Understanding the Scope of the Delaware Franchise Tax

Before delving into the filing process, it’s essential to understand who exactly is obligated to pay the Delaware Franchise Tax. In simple terms, this tax applies to all businesses that are incorporated in Delaware, irrespective of their revenue or profitability. Therefore, if your company calls Delaware home, you’ll need to ensure compliance with this tax requirement to uphold your business’s legal status.

Step-by-Step Guide to Filing the Delaware Franchise Tax

Now that we’ve established the scope of the tax, let’s explore the steps involved in filing the Delaware Franchise Tax. Whether you opt to tackle this task independently or seek professional assistance, these steps will serve as your roadmap to successful tax compliance.

Step 1:

If you’re unsure about your Business Entity File Number, you can look it up on the designated website. Just make sure you’re getting the right number for your company to avoid accidentally paying someone else’s tax!

Step 2:

When you’re ready to file your annual report, you might see a large “amount due” on the screen. Don’t panic! This often scares startup founders unnecessarily, but it’s a common experience. There are two ways to calculate your tax, and you can choose the one that results in a lower amount:

• Authorised shares method: This calculates your tax based on the total number of shares your company is allowed to issue, regardless of how many are actually issued. For startups, this method can lead to higher tax amounts.
• Assumed par value method: This method considers both your issued shares and gross assets. It usually results in a lower tax, with a minimum of $400. This method is typically preferred by startups and small companies.

Step 3:

Enter all the necessary stock information into the provided table and click “Recalculate Tax.” You’ll need to provide:

• The total number of shares your company has issued, not just the authorised amount. This is usually the number of shares outstanding.
• For “gross assets,” enter the total assets from your previous year’s balance sheet, which is often your bank balance as of December 31st.

Step 4:

Fill in your business address (not your registered agent’s address), the details of one of your company’s corporate officers (usually the CEO), and the information of everyone currently on your board of directors. Even if you don’t think you have a board, it’s essential to check your incorporation documents.

Once you’ve reviewed all the information and made sure it’s accurate, you can proceed to pay the tax through the website.

For early-stage startups, the tax amount is typically around $400 per $1 million in gross assets, plus a $50 filing fee.

Step 5:

Before finalising your filing, take a moment to review all the information you’ve provided for accuracy and completeness. Double-check each field to ensure there are no errors or discrepancies that could impact the validity of your submission. Once you’re satisfied with the accuracy of your filing, proceed to submit your payment through the online portal.

Considering Professional Assistance

While many business owners opt to handle their Delaware Franchise Tax filing independently, others may prefer to enlist the services of a professional tax preparer. If you already have a tax preparer, inquire whether they offer assistance with filing the Delaware Franchise Tax as part of their service offerings. Some tax preparers may include this service at no additional cost, providing you with peace of mind and expert guidance throughout the process.

Alternatively, if you’re looking for specialised assistance tailored to your business’s needs, YourLegal is here to help. Our team of experts can provide personalised support and ensure that your Delaware Franchise Tax filing is completed accurately and on time. With our dedicated assistance, you can navigate the complexities of tax compliance with confidence, allowing you to focus on growing your business.

In Conclusion

Filing your Delaware Franchise Tax on time is essential for maintaining your business’s good standing with the state and ensuring compliance with legal requirements. By following the steps outlined in this guide and staying proactive with your tax obligations, you can navigate the filing process with confidence and set your business up for continued success in Delaware’s dynamic business landscape.