Due to its advantageous company regulations and tax advantages, Delaware is a preferred jurisdiction for business owners to incorporate their organizations. However, the annual franchise fee that businesses must pay is one of the drawbacks to forming in Delaware. Although it could be tempting to try to avoid paying this tax, it’s crucial to be aware of the possible repercussions. We will examine the choices open to business owners in this post for avoiding or reducing their Delaware franchise tax liability.
Yes, franchise taxes must be paid annually by Delaware LLCs. The number of members in an LLC or the authorized shares of the company determine the tax liability. For LLCs, the annual minimum franchise tax is $300.
In order to dissolve your Delaware single member LLC, you must submit a Certificate of Cancellation to the Delaware Division of Corporations. The $200 filing fee for this form must be paid online or by mail. The Division of Corporations will issue a Certificate of Cancellation after receiving the form and payment, formally terminating the LLC. Dissolution as opposed to termination Dissolution and termination are two distinct procedures in Delaware. A company’s affairs are wound up and its assets are liquidated during a dissolution. On the other hand, termination is the procedure used to cease a company’s legal existence. In Delaware, a company must have all of its affairs wound up and all debts and obligations paid before it can be dissolved. Following completion of this, the business may submit a Certificate of Termination to the Division of Corporations. Dissolution as opposed to cancellation In Delaware, dissolution and cancellation are also two distinct procedures. A company’s affairs are wound up and its assets are liquidated during a dissolution. On the other hand, cancellation is the process of removing a company’s right to conduct business in Delaware. A firm can revoke its license to operate in Delaware by submitting a Certificate of Cancellation to the Division of Corporations if it is no longer conducting business there.
In conclusion, even though it could be alluring to try and avoid paying Delaware’s yearly franchise taxes, it’s crucial to be mindful of the potential repercussions of doing so. There are a few ways for business owners to reduce their tax obligations, such as restructuring their organization or lowering the number of authorized shares. File a Certificate of Cancellation with the Division of Corporations if you are a single member LLC seeking to dissolve your business. Finally, in order to ensure that your company is wound up properly and that its affairs are in order, it is crucial to comprehend the distinctions between dissolution, termination, and cancellation.