CorpCo Blog

It happens every December – we receive phone calls and emails from confused clients …. DO I need to file this?  When is it due?  I am not a franchise, WHY do I have to file this?  I closed my business this year, is this really necessary to file? 

So here we go – answers to the most commonly asked questions regarding Delaware franchise taxes and annual reports:  (And if your question is not answered below, contact  CorpCo )

WHO NEEDS TO FILE – If you have a Delaware corporation that was in existence for ANY amount of time in 2011, then you must file the annual report and pay the franchise tax for 2011, on or before March 1, 2012.  It makes NO difference whether your company is a “franchise” or not – this is simply the name the tax goes by …… EVERY “for profit” Delaware corporation must pay a franchise tax and file an annual report each year, for being in existence the previous year.  (Delaware LLC’s file and pay an annual tax as well, but these tax reports are not generated until March and not due until June 1st.)

WHEN WILL I RECEIVE MY REPORT/BILL AND WHEN IS IT DUE:  Reports and tax notices are generated by the Delaware Secretary of State’s office in December and you will receive yours in early January.  The report and tax must filed/paid no later than March 1st.  If received after March 1st, a $125 late fee is added, and interest will continue to accrue on the balance due, until paid in full.

HOW ARE TAXES CALCULATED – Franchise taxes are calculated based on the number of authorized shares of stock in the company – for no par value stock, the following calculation always applies:

• 5,000 shares or less (minimum tax) $75.00
• 5,001 – 10,000 shares – $150.00
• each additional 10,000 shares or portion thereof add $75.00
• maximum annual tax is $180,000.00

 For corporations with PAR VALUE assigned to their authorized  stock – the following calculation can be used:

Assumed Par Value Capital Method

To use this method, you must give figures for all issued shares (including treasury shares) and total gross assets in the spaces provided in your Annual Franchise Tax Report.  Total Gross Assets shall be those “total assets” reported on the U.S. Form 1120, Schedule L (Federal Return) relative to the company’s fiscal year ending the calendar year of the report.  The tax rate under this method is $350.00 per million or portion of a million.  If the assumed par value capital is less than $1,000,000, the tax is calculated by dividing the assumed par value capital by $1,000,000 then multiplying that result by $350.00.  

The example cited below is for a corporation having 1,000,000 shares of stock with a par value of $1.00 and 250,000 shares of stock with a par value of $5.00 , gross assets of $1,000,000.00 and issued shares totaling 485,000.

1. Divide your total gross assets by your total issuedshares carrying to 6 decimal places.  The result is your “assumed par”.Example: $1,000,000 assets, 485,000 issued shares = $2.061856 assumed par.
2. Multiply the assumed par by the number of authorizedshares having a par value of less than the assumed par.Example: $2.061856 assumed par s 1,000,000 shares = $2,061,856.
3. Multiply the number of authorized shares with a par value greater than the assumed par by their respective par value.Example: 250,000 shares s $5.00 par value = $1,250,000
4. Add the results of #2 and #3 above.  The result is your assumed par value capital.Example:  $2,061,856 plus $1,250,000 = $3,311 956 assumed par value capital.
5. Figure your tax by dividing the assumed par value capital, rounded up to the next million if it is over $1,000,000, by 1,000,000 and then multiply by $350.00.Example: 4 x $350.00 = $1,400.00
6. The minimum tax for the Assumed Par Value Capital Method of calculation is $350.00.