Delaware Franchise Tax

The Delaware franchise tax is a tax imposed on businesses that are incorporated in the state of Delaware or that are foreign corporations that are authorized to do business in Delaware. The franchise tax is based on the value of the corporation’s assets, capital stock, and surplus, and is calculated using a formula set out in the Delaware Code.

The franchise tax is separate from the Delaware corporate income tax, which is imposed on the income of corporations that are incorporated or doing business in Delaware.

The franchise tax is an annual tax, and corporations are required to pay the tax by March 1 of each year. The tax is due regardless of whether the corporation is profitable or has generated any income in the state.

Delaware has a reputation as a favorable state for incorporation due in part to its favorable franchise tax structure. Many companies choose to incorporate in Delaware due to the state’s business-friendly laws and its lack of a corporate income tax for out-of-state companies.

It’s important for businesses that are incorporated in Delaware or doing business in the state to be aware of and comply with the Delaware franchise tax to avoid potential penalties and fines.

To file the Delaware franchise tax, you will need to follow these steps:

1. Determine Your Franchise Tax Liability

   The Delaware franchise tax is based on the value of the corporation’s assets, capital stock, and surplus. You will need to calculate your franchise tax liability using the formula set out in the Delaware Code.

2. Obtain the Necessary Forms

   You can obtain the necessary forms for filing the franchise tax from the Delaware Division of Corporations website or by contacting the division directly.

3. Complete the Form

   Fill out the franchise tax form with the required information, including your corporation’s name, Delaware file number, and the calculated franchise tax liability.

4. File the Form

   You can file the franchise tax form electronically or by mail. The franchise tax is due by March 1 of each year.

5. Pay the Franchise Tax

   You must pay the franchise tax by the deadline to avoid late payment penalties and interest. You can pay the tax by check, credit card, or electronic funds transfer.

The above is for informational purposes only and should not be taken as tax advice or professional advice. Please consult a licensed professional.

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