How to pay Delaware franchise tax and file annual report - step by step guide

If you own a Delaware incorporated or registered Company, you need to file your Delaware state annual report and pay your Delaware franchise tax at the latest by March 1st of every year. This is the latest for the year 2022 but in the future years, it may change.

You may,

• be a non-US owner,
• be a US-owner and/or
• have no transactions, revenue in a certain year

It does not matter!  If your company is incorporated and/or registered in Delaware state (even on Dec 31st, the last day of the year), you still need to file your annual report and pay the franchise tax at the latest on March 1st of the following year.

But there is also the goods news... If your company was incorporated in a certain year but was inactive for a period of time during the year, you can report this in the "inactive period" section and pay less taxes. There is more information below on this subject.

A step-by-step guide to filing your Delaware state annual report and paying the Delaware franchise tax

Disclaimer! Please treat this article as general guidance and not as legal or tax advice. You can refer to the Delaware state site, links provided below the article, for the latest updates and rules.

The Delaware state site URL to file your annual report and pay the franchise tax is also listed below for easy access.

Let's start with the information you need to file and pay your Delaware Franchise Tax (Delaware State Annual Report)

We suggest that you read the below information first, and then proceed with the link provided at the end of the article.

•  Your DE state 7 digit File ID number (business entity file number):

A state File ID is the ID number that your company has with each state. If you are registered in multiple states, you probably will have different ID numbers from each state. State File ID number is different than your EIN number.

You can find it in the Incorporation certificate received from the state or prior year franchise tax annual report. 

If you can not find it or if this is your first time, you can find your state file ID number by clicking the link "search for your business by name".

Type your Company name in the “Entity Name” box and hit Search.

Please ensure that you type your Company name to match the exact name as used in the incorporation documents. You will see a list of Company names matching your search criteria, choose your own Company and note the File ID number.

• The EIN number of the Company.

EIN (Employer Identification Number) is your company's ID number with IRS - the federal tax authority. This is different than the state File ID number.

If you haven’t received it yet, then you would want to rigorously follow up with IRS and get it before the March 1st, 2022 deadline.

If you can not file on or before March 1st deadline, you can file later but would have to pay some penalty and interest.

• The number of issued shares.

You can find this information in the share issuance documents, capable or stock register. If you haven’t issued any shares yet, then it is nil (zero).

Please bear in mind that authorized and issued shares are different concepts. If you are not familiar with these, please consult with your accountant.

A reminder! If you don’t have a capable or a stock register (even a simple spreadsheet document for this), then please either create one or consult with your accountant or lawyer.

• The Gross Assets:

This the USD value of your gross assets at the financial year-end, usually December 31st for many businesses, unless you have chosen a different tax year deadline.

Gross assets may differ for accrual basis and cash basis balance sheets. If you have filed tax returns previously, you would know whether you are cash or accrual basis.

If this is your first year, then you may want to decide how you will file your tax returns and complete your form accordingly. If you don’t know, consult with your bookkeeper, accountant or tax preparer. You can always reach out to us for professional help.

A reminder!  The franchise tax you will pay depends on the value of the gross assets, as well as the number of issued shares. You may be audited for your filing and thus, please ensure that the value of the gross assets entered agrees to your annual financial statements and you can find this value in the balance sheet dated end of your fiscal year.

If you are not sure, please consult with your accountant.

• The principal place of business (The business address):

For non-US owners, this may be tricky. This usually is the address you used for the SS-4 form and/or in the incorporation document.

If you don’t have a physical presence in the US and if you conduct your business in your local country, you may use your local country address.

Mailing address and the principal place of business address may be two different addresses or the same.

Most non-US owners, without a physical presence in the US, have a US mailing address and their local country office address (or home-office) as the principal place of the business address.

A reminder! The address written on your SS-4 form sent to IRS may not reflect your current address information. Please check your SS-4 form, and/or prior-year tax returns (if any) to ensure you have updated address information also with IRS. If not, you may need to file Form 8822-B to update your business mailing and principal addresses.

If you are not sure what address to use, what to report as your business address (principal place of business) please consult with your accountant as this is critical information both for the state and the federal tax authority, the IRS.

• The addresses of the Company officers and directors.

Officers and directors are different titles/roles and maybe the same or different people. You can check your Company by-laws to see if there are any assigned officers of the Company.

The directors are usually the board members (mostly the founding members but maybe different for your Company).

Please bear in mind that these are the addresses of the individuals and for most non-US owned businesses, these are non-US addresses.

A reminder! Company officers and directors are critical information both for the state and the federal tax authority, the IRS. These titles are part of the company's governance and are usually defined in the by-laws of the Company and/or general assembly decisions and/or board decisions. 

If you are not sure what these are and/or the governance, please consult with your company's lawyer or accountant.

• The dates for inactivity:

If your company was incorporated and had nil activity for a period of time (e.g. no bank transactions, no revenues, sales or Stripe/PalPal/Transferwise, no expenses, etc. transactions), then you can enter the inactivity period.

A reminder! Please be ready to substantiate the evidence of this inactivity period for future audits from the state as you will pay less franchise tax for the inactive period. If you are not sure, consult with your accountant.

If you have all the above information available, you can start your Delaware State Franchise Tax Annual Report filing.

• Go to the Delaware State Tax payment site and click "Click here to pay taxes".  Linked here
• Enter your 7 digit business entity File  number (or find it using the directions in the site)
• Select the Tax Year that you want to file for. It is usually the last year on the screen (below example is for 2020) - File Annual Report.
• If you haven't filed the prior periods, you can select prior years, complete the annual report (the information required) as guided here. You may incur penalties and interest for late filing and payment.
• If you have already filed prior years and if you are comfortable that they were correct, we recommend not to touch those prior-year links.
• DE state charges a fee (it was $50 for the years 2021-22) for each year filing and/or amendment.

DO NOT be shocked to see a high USD value for the franchise tax payable! This will change.

• Check your Company Information, the registered agent information to ensure they are accurate.

• Complete the required information in the first section:
  • Type in your Federal Employer ID. This is your EIN number and please do not use the “-“ sign. Enter the EIN without any signs.
  • If you have filed DE franchise taxes before or your information was pushed to the DE system timely, the number of authorized shares (No. of shares and Par Value/Shares boxes) would come in pre-filled. You can not change the number of authorized shares. If these numbers are incorrect, then you should contact the DE state for any updates on the number of authorized shares and/or par value per share.
  • Type in your number of issued shares, gross assets, and the date for the value of the gross assets. 
  • The end date of the fiscal year is usually December 31st for many Companies unless you have defined a different end fiscal year date.
  • If any, type in the Dates of Inactivity.
• Then, click the “Recalculate Tax” button.

You will see the franchise tax payable value change, probably to a very low amount - depending on your Company type, number of issued shares, gross asset value, and inactive dates (if any).

• Enter the required information for the Officers and Directors of the Company.

 Congratulations... You have completed the annual report, but not filed it yet.

To file the annual report, you can follow the instructions on the screen to make your franchise tax payment. You can either choose the:

• ACH direct debit option (where you enter your company's US bank routing and account number), or
• pay with your debit/credit card (we suggest using the company's card linked to the company's US bank account)

After your payment, you can download your filed Delaware state annual report that shows the information you entered, as well as confirmation of the payment.

If you need help with our services to manage this process for you, just click the image below for easy checkout.

Disclaimer! Filing tax returns is a very important responsibility for all US companies and individuals. Please treat this article as general guidance, not as legal or tax advice, and consult with your accountant when in doubt or refer to the resource links provided below.

That is it. If you believe that this article was useful, please do share it with your friends and community on social media.

The resource links:

Delaware State Tax payment site: https://corp.delaware.gov/paytaxes/

How to calculate franchise taxes: https://corp.delaware.gov/frtaxcalc/

DE state taxes: https://delcode.delaware.gov/title30/index