What is Delaware annual return and franchise tax?

Annual Return

Statutory business entities which include business corporations, nonprofit corporations, limited liability companies (LLCs), limited partnerships (LPs), and limited liability partnerships (LLPs) are generally required to file an information report with the business entity filing office of their formation state and of every foreign state in which they are qualified to do business.

Franchise tax 

A franchise tax is a state tax levied on certain businesses for the right to exist as a legal entity and to do business within a particular jurisdiction. Amount of tax calculated is based on organization size and method opted for calculation of taxes. 

While filling the annual return each organization needs to pay Franchise tax as well.

Who needs to file Delaware annual return & franchise tax?

Organizations incorporated in Delaware’ or registered as foreign entities must file annual returns and pay franchise tax. Non-profits file annual returns but are exempt from franchise tax.

Information to be reported in annual return 

For filing annual returns some basic details are required like: 

1. Authorized share capital 
2. Officer and directors’ details 
3. Place of business and gross assets of the company

Franchise tax calculation methods 

Authorized shares method: This method is useful for entities with lower authorized capital and having no plans to increase it in the future. 

Assumed par value capital: This method is useful for entities with higher issued capital. The minimum tax liability under this method is $400.

Due dates 

1. March 1^st Annually: For entities that have incorporated in Delaware.
2. June 30^th Annually: Entities that are incorporated in other states but have obtained foreign business qualification in Delaware.
3. Larger corporations with a franchise tax liability of $5000 or more are required to pay estimated taxes in quarterly installments on the first day of the month ending the quarter. For example, payment for the first quarter is due by the 1^st of June.

Filing fee 

1. Domestic entity: 
   1. Profit Corporation: $50+franchise tax. 
   2. Non-Profit/exempt Corporation: $25 
2. Foreign entity: $125+ 

Note: If LPs, LLCs and General Partnerships formed in Delaware do not file an Annual Return, they are required to pay an annual tax of $300 (which would have otherwise been less, if they filed). Taxes for these entities are due on or before June 1^st of each year. 

Penalty for non-compliance: 

1. Domestic entity: $200 plus 1.5% eps interest per month on tax and loss of good standing certificate. 
2. Foreign entity: $125