Many firms prefer to incorporate in Delaware because of the state’s well-known reputation for being business-friendly. However, Delaware levies taxes on businesses just like every other state. The franchise tax, which is a tax on the right to conduct business in the state, is one of these levies. The maximum amount, how to change it, the number of shares a corporation can have, and who is subject to the tax are some of the most common queries we will address in this article regarding the Delaware franchise tax.
The type of corporation determines the maximum Delaware franchise tax. The lowest tax for businesses that aren’t allowed to issue shares is $400, while the maximum tax is $200,000. The lowest tax for businesses that are permitted to issue shares is $175, while the maximum tax is $200,000. It is significant to remember that the number of authorized shares, not the number of issued shares, is used to determine the franchise tax.
You can file an amended annual report if you need to make changes to your Delaware franchise tax. The updated report can be submitted online or by mail. You must include accurate information when submitting the updated report, including the total number of authorized shares and the calculated amount of franchise tax due. Any additional tax due must also be paid. You can submit a claim for refund if you overpaid your franchise tax and would like a return.
Any number of authorized shares is permissible for Delaware corporations as long as it is specified in the certificate of formation. A legal document known as the certificate of incorporation forms the corporation and describes its goals, organizational structure, and administrative structure. A change to the certificate of incorporation might raise or decrease the number of authorized shares.
Delaware levies corporate income tax, a gross receipts tax, and a withholding tax on corporations in addition to the franchise tax. On taxable income generated in Delaware by corporations that are not exempt, the corporate income tax rate is a flat 8.7%. The gross receipts tax, which can range from 0.096% to 0.746% depending on the industry, is a tax on a company’s total receipts. Depending on the employee’s salary, the withholding tax, which is a tax on wages paid to workers in Delaware, can range from 0.25% to 6.6%.
Delaware franchise tax applies to any businesses that have been incorporated in the state or are permitted to operate there. Both corporations that are not-for-profit and corporations that are not subject to federal income tax fall under this category. Penalties, interest, and even the loss of the corporation’s right to conduct business in Delaware may follow nonpayment of the franchise tax.
The Delaware franchise tax, which varies depending on the form of corporation and the number of authorized shares, is a tax on the right to conduct business in the state. You can file an amended annual report if you need to make changes to your franchise tax. Delaware corporations are subject to various taxes on businesses, such as corporate income tax, gross receipts tax, and withholding tax, and they are allowed to have any number of authorized shares. The franchise tax applies to all businesses that are either Delaware-incorporated or have a permit to operate there.