To stay in good standing with the State of Delaware, LLCs must pay an annual Franchise Tax. This flat fee is non-based on profits or capitalization and therefor not subject to adjustment.
An LLC’s budget may be stretched thinly in the early days of their business venture, but it is necessary for them to stay compliant with Delaware law and safeguard its members from potential liabilities.
Filing
If your company is formed in Delaware, you must file a franchise tax and annual report annually. These are due on March 1 and June 1 respectively for corporations and LLCs (or limited partnerships).
For LLCs, the tax is a flat $300 that must be paid to the Department of State. Failure to pay will result in an additional $200 penalty plus interest.
Additionally, an LLC that fails to pay its franchise tax will forfeit its Good Standing status, which is essential for securing loans or entering new business ventures.
Taxes in Atlas companies can be calculated using either the Authorized Shares Method or Assumed Par Value Capital Method. Generally speaking, companies find their tax owed decreases when using the Assumed Par Value Capital Method.
Payment
If your LLC was formed in Delaware, then each year you must pay a flat-rate franchise tax. You can conveniently make this payment online using either credit card or checking account.
Taxes must be paid in full on or before June 1. A $200 penalty will apply for late payments, plus interest at 1.5 percent per month.
Additionally, domestic corporations must file an annual report by March 1st.
To register a company in Delaware, you’ll need its seven-digit Delaware Business Entity File Number and total share count. These can be located on either your Certificate of Incorporation or recent balance sheet.
Additionally, you must estimate the amount of fees due for the current tax year and pay them by the 15th day of the 6th month. However, if your LLC’s tax year ends before that date, there is no need to estimate a fee.
Extensions
If you need to file a Delaware LLC tax return, make sure it’s done by June 1st. There will be an additional $200 late fee and 1.5% interest charged for late payments each month.
You can extend the deadline for filing your Delaware LLC tax return online by visiting the Division of Corporations website and clicking “Pay Taxes/File Annual Report.”
Corporations must file both a franchise tax and annual report by March 1st. This requirement applies to domestic corporations taxed as C corporations, as well as foreign corporations that have an established office in Delaware but are not exempt from paying the franchise tax.
When filing for an extension, it’s essential to estimate your tax liability and any payments or credits that could reduce it. With these figures in hand, you can calculate what you owe on the original due date and include payment with your extension application.
Penalties
If you own or manage a Delaware LLC, it is essential to be aware that the state requires annual report filings and franchise tax payments be made on time. Failure to file and pay on time can result in late fees and penalties, potentially placing your business at risk of losing its good-standing status.
Corporate entities’ franchise tax is determined using one of two methods. The authorized shares method determines the total number of authorized shares, while the assumed par value capital method calculates it based on all assets owned by the corporation.
Franchise tax for LLCs is $300 annually and must be paid by June 1. If your LLC fails to file or pay by that deadline, a $200 penalty and 1.5 percent per month interest charges will apply.
Nonpayment of franchise taxes by Delaware LLCs that fail to meet the deadline can result in administrative dissolution and loss of good standing within the state, potentially hindering expansion into other states, getting loans or entering new ventures.
