Understanding Delaware's Corporate Annual Report

Navigating the corporate responsibilities in Delaware can seem like a daunting task, especially when it comes to filing your Annual Report and understanding the intricacies of Franchise Tax. But don't worry; here's a straightforward breakdown to help you grasp the essentials without getting lost in legal jargon.

It's That Time of the Year Again: Filing Your Corporate Annual Report

If you run an active domestic corporation in Delaware, remember to mark March 1st on your calendar. This date is your annual deadline for filing your Corporate Annual Report and paying your Franchise Taxes for the previous year. Thanks to the magic of the internet, these filings must be done online. Miss this deadline, and you're looking at a $200 penalty, plus an interest of 1.5% per month on your tax and penalty. No one likes extra fees, so it's best to stay ahead of the game.

What Will Filing Set You Back?

As of September 1, 2019, Delaware has set the following fees:

  • Exempt Domestic Corporations: $25

  • Non-Exempt Domestic Corporations: $50 Think of the fee as the cost of keeping your business compliant and in good standing.

Let’s Talk Franchise Tax

Franchise Tax might sound like something a fast-food chain pays, but it's actually a fee levied on corporations for the privilege of being incorporated in Delaware. It's assessed from January 1st to December 31st of the current tax year. The minimum tax you're looking at is $175 if you're using the Authorized Shares Method, and $400 for the Assumed Par Value Capital Method. However, big players, known as Large Corporate Filers, have their tax capped at $250,000.

Calculating Your Franchise Tax Dues: More Than One Way to Skin a Cat

  • Tier 2 Delisting: Got delisted from the stock market? Make sure you update your Franchise Tax status with the SEC's delisting form.

  • Domestic Non-Stock for Profit: If you're a non-stock entity not qualifying as exempt, your franchise tax will be $175.

  • Foreign Corporations: Not based in Delaware but operate there? Your filing is due by June 30 every year, with a fee of $125. Miss the deadline, and that’s another $125 on your bill.

Method Madness: Choose Wisely to Save Money

  • Authorized Shares Method: Got no par value stock? This method likely results in lower taxes, starting at $175 for 5,000 shares or less.

  • Assumed Par Value Capital Method: This takes into account your total gross assets and issued shares. Starting tax is $400 per million or a portion thereof of your assumed par value capital.

Real-Life Example: Let's Crunch Some Numbers

Imagine your corporation has 1,000,000 shares at $1 par value and 250,000 at $5, sitting on $1,000,000 in assets, with 485,000 issued shares. Doing some quick math:

  1. Divide total assets by issued shares = $2.061856 (assumed par).

  2. Multiply assumed par by number of shares at less than assumed par = $2,061,856.

  3. Your total assumed par value capital is $3,311,856.

  4. The tax for this scenario? $1,600.

Bottom line: The minimum tax using the Assumed Par Value Capital Method is $400.

Key Takeaways:

  • Never miss the March 1st deadline.

  • Choose the calculation method that minimizes your tax.

  • Keep an eye on your email for filing reminders to avoid those penalties.

With these insights, you're better equipped to navigate the Delaware Annual Report and Franchise Tax filing process. Remember, staying informed and proactive about your corporate responsibilities is key to maintaining good standing and ensuring your business thrives in The First State.