Frequently Asked Questions
Annual Government Fees
Annual Government Fee for an INC
A major issue arises when the company fails to pay annual fees.
The state has the power to revoke your company charter. Without a current charter someone later suing the company can piece the corporate veil and pursue claims against the individual owners. By failing to keep your corporate charter in place due to nonpayment of the annual fees you are now personally liable for the company’s claims.
The calculations for the fees of an INC are very complicated.
There are two methods to calculate a Delaware corporation’s franchise tax: Authorized Shares method and Assumed Par Value Capital Method. The corporation pays the lesser of the two amounts, as calculated below.
Authorized Shares Method
If a corporation has 5,000 shares or less, it pays the minimum tax of $175. For corporations with 5,001 to 10,000 shares, the tax is $250. For corporations with over 10,000 shares, the tax is $250 plus $85 for each additional 10,000 shares (or portion thereof) to a max annual tax of $200,000.
Assumed Par Value Method
To use this method, a corporation must report its total number of issued shares (including treasury shares) and total gross assets listed on Schedule L (Form 1120) for the company’s fiscal year ending the calendar year of the report.
For corporations using the Assumed Par Value Method, the minimum tax is $400. The tax rate using this method is $400 per $1,000,000 (or part thereof) of assumed par value capital, with a maximum annual tax of $200,000.
The Delaware Division of Corporations provides additional information on calculating the tax due, including an annual franchise tax calculator that helps estimate what a corporation may owe using either the Authorized Shares method or Assumed Par Value method.