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How to File a Delaware Annual Report

By IncNow | Published May 28, 2021

franchise tax paymentFiling the Delaware annual report online only takes five minutes. Avoid the $125 penalty, plus interest and keep your corporation in good standing by filing your Delaware annual report on-time.

When Is the Delaware Annual Report Due?

The Delaware General Corporation Law requires that every corporation in Delaware file an annual report and pay a fee (known as the “Delaware franchise tax”) every year on or before March 1. Franchise Tax is a term that means: privilege fee for being granted special license from the state to conduct a business chartered under this state’s laws. It has nothing to do with a restaurant franchise.

How Much is the Delaware Annual Report?

Technically, the Delaware Annual Report doesn’t cost anything, but it is submitted along with the annual Delaware franchise tax. Delaware assesses this privilege fee regardless of business activity. It is not an income tax. It is a flat fee based on the authorized stock in the corporation. Most corporations have 1500 shares and are classified as “minimum stock” corporations. They owe $175 in franchise tax, plus a $50 filing fee. The fee for a non-profit corporation is only $25. Corporations with large numbers of authorized shares can owe up to about $180,000 in taxes. However, if a small company has a large number of authorized shares and insignificant assets, it can “recalculate” its franchise tax. This is calculated based on the assets of the company, typically down to about $400, depending on a formula based on assets and issued stock.

What Happens If I Don’t Submit an Annual Report?

If your corporation fails to pay the fee (and/or file the annual report) and your corporation goes into arrears, the state will revoke the corporation’s charter. Administratively the Delaware Secretary of State calls this first stage of arrears “X” status. Then, after two more years, the company’s status is switched to “Void” status. If a company is declared void, it can later be reinstated by filing a Certificate of Renewal and Revival. That renewal also has fees and requires previous annual reports to be filed simultaneously. Fortunately reinstating a void company retroactively ratifies the entire period of time it was out of good standing to have the effect as if the company has always been in good standing. Therefore there are no gaps, once the renewal is filed.

Delaware Annual Report Requirements

In the annual report, the state of Delaware requires that the person completing the report (officer, director, or incorporator) must disclose all of the directors of the corporation and their addresses, plus the name of one officer. The list of directors must be the list current as of the time of filing, not at any other point in time, such as the end of the previous year.

Many small businesses do not think they have directors because they are only familiar with the roles of the officers (President, Secretary and Treasurer) and stockholders. However every Delaware corporation (other than certain types of “Close Corporations”) have directors.

Directors are the link in the chain that connects the stockholder to the officers. Stockholders elect the directors annually. Then the directors appoint the officers to run the show. The stockholders are not permitted to elect the officers directly.

Therefore when filing an annual report listing directors, every active business must have at least one director. Checking a box listing “no directors” is a misrepresentation (usually through honest ignorance albeit well-intentioned).

The State of Delaware no longer sends out the “green check paper” forms with return envelopes to complete and return. Instead the reports need to be entered online, only. Many registered agents have their own web-based services that allow you to complete the annual report in a manner that is more user-friendly than the state of Delaware’s website. For example, the State of Delaware does not save information to avoid rekeying every year. Also the State of Delaware does not accept American Express.

Once your registered agent’s system receives all of your director information and the name of one officer, then the agent’s system sends the report to the Division of Corporation’s system for filing by XML. Then the state generates a report that is on public record which reflects the information entered online.

Although this online system had much resistance when initially launched, it has been accepted by the registered agent community and proprietors of Delaware corporations.  Should you have questions about your annual report filing or franchise tax amount, please call our office and we will be glad to assist.

When deciding where to form your company, consider that Delaware has advantages over your home state that may benefit you. Go