Franchise taxes overview
Franchise Tax Reports for Delaware corporations are due annually by March 1.
The word franchise is often associated with restaurants and retail outlets—but franchise taxes, which are due annually to the Delaware Secretary of State, are a completely different subject matter. The Delaware Division of Corporations explains it this way:
Any corporation that is incorporated in Delaware (regardless of where you conduct business) must file an Annual Franchise Tax Report and pay Franchise Tax for the privilege of incorporating in Delaware.
Any entities that have incorporated in Delaware must file an Annual Franchise Tax Report.
The deadline for this filing is March 1 to avoid penalties. Missing the deadline can mean a penalty of $200 or more, and the interest on the unpaid tax balance accrues at a rate of 1.5% per month. If you fail to file the report for two years in a row, Delaware can revoke your company’s Charter.
There are two methods for calculating franchise taxes:
- Authorized Shares Method: For corporations having no par value stock, the authorized shares method will always result in the lesser tax.
- Assumed Par Value Capital Method: This method requires figures for all issued shares (including treasury shares) and total gross assets.
Because the calculations for each of the methods are different, the amount of tax due will vary. Delaware lets you choose the method that is most advantageous to your company, and you may want to consult with your accountant and/or attorney to determine which method is best for your company.
The State of Delaware has two tools available to assist in calculating taxes due, both using either the Assumed Par Value Capital Method or the Authorized Shares Method. The Delaware tax calculator will produce an estimate of the taxes due. The How to Calculate Franchise Taxes page will describe the calculation instructions for using each method.
Continue to the DE Annual Report and Tax Instructions page to file your Annual Report and pay your taxes.
If you have questions, Delaware offers a Franchise Tax FAQ to help, and your accountant and attorney can also provide useful guidance. Remember, most companies that incorporate in Delaware actually operate in another state (or states). You will need to file an annual report and/or pay associated taxes and filing fees in every state where your company is registered to do business as a foreign corporation. Filing deadlines vary but can be found on each state’s Division of Corporations website, like California, Massachusetts, and New York, just to list a few. Be sure to mark your calendar to file all your reports on time!
Have us file your Delaware Annual Report and pay your franchise tax
You can choose to file the Annual Franchise Tax Report on our platform, on your own, or you can partner with a registered agent, attorney, or accountant. If you elect to file through the Fidelity Private SharesSM platform, you must submit your request via the Annual Franchise Tax workflow (described below) no later than February 15th. For this transaction to be finalized on our platform, payment must be completed by February 22nd.
As a reminder, your company also has tax and/or filing obligations in every state that you are registered to do business in as a foreign corporation, and we do not file annual reports and/or pay associated taxes in foreign states on your behalf.
If you choose to have us file your Delaware annual report, the File Delaware Annual Report and Pay Franchise Tax workflow will allow you to kickstart this process. We will file your Delaware annual report and help you pay your franchise tax through Corporation Service Company (CSC). You'll find this workflow under the Government Filing section of the workflow page. The first page of this workflow will provide you with an overview of the process and necessary fees. Follow the workflow prompts and we will let you know a quote for your franchise taxes. Should you decide to proceed with the filing through our platform, you will make payment through the platform and your annual report will be filed with Delaware. We will upload a copy of this report to your account as well, for easy retrieval should you ever need it.
Fidelity does not provide legal or tax advice. The information herein is general in nature and should not be considered legal or tax advice. Consult an attorney or tax professional regarding your specific situation.
Fidelity Private Shares LLC provides cap table management and other administrative services to private companies and their equity compensation plans.
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