How is the Delaware franchise tax calculated?

Delaware franchise tax is among the key compliance obligations of companies that are registered with the state. The calculation varies with the form of the business entity, such as corporations, Limited Liability Companies (LLCs), and Limited Partnerships (LPs).

In corporations, Delaware has two methods of calculating the tax:

• Authorized Shares Method: The basis of tax is the authorized shares, in the sense that corporations with more shares will be taxed more.
• Assumed Par Value Capital Method: This is an alternative method and considers the issued shares and total assets of the company. It can result in lower taxes for certain corporations.

Companies are free to choose the method that lowers their tax bill, as Delaware provides companies with the option of comparing both calculations before paying.

For LPs and LLCs, they are taxed a flat tax yearly regardless of income or business activity. They are not, unlike corporations, subject to more than one tax computation, so their taxes are more predictable.

The franchise tax filing deadline differs based on the entity, and payments made after the deadline may incur penalties or fees. In order to maintain good standing for the company, companies must pay on time and comply with Delaware statutes.

Delaware franchise tax knowledge is imperative for businesses seeking to operate efficiently and minimize tax liabilities. Complying with care avoids the wastage of money and lawsuits.

For professional counsel on the management of taxes, compliance with needs, and operating a Delaware company effectively, One IBC USA offers expert advice specifically tailored to corporate needs.

Find more information: Managing the Delaware Corp Franchise Tax Effectively