Corporation formation is an essential step in starting (and running) a company. It can feel like a daunting task, thanks in part to many myths that surround it.
Let’s dig into—and demystify—some of the most common corporation formation myths.
Corporation formation is an essential step in starting (and running) a company. It can feel like a daunting task, thanks in part to many myths that surround it.
Let’s dig into—and demystify—some of the most common corporation formation myths.
Incorporating a business in Delaware has many advantages. Most articles on the web point to tax advantages, but there’s more to it than that. Companies appreciate the state’s effort to keep the “Delaware corporation statute modern and up-to-date” and the “quality of Delaware courts and judges.” As a result, the Delaware Secretary of State imposes an annual tax for the privilege of incorporating in the state. This tax is known as the Delaware Franchise Tax and it accounts for about a third of the state’s annual revenue.
The Delaware Franchise Tax must be paid annually by any business legally incorporated in the state. Deadlines and calculated amounts differ by entity type:
Side note: the annual reports referenced above typically include the company’s address, phone number, general stock and financial information, the name and address of at least one officer and the names and addresses of all directors.
Taking care of headaches like paying the Delaware Franchise Tax is something we love doing for our clients. You can get started with our Franchise Tax Order Form, or, feel free to give us a call at 800-346-4646. /end-sales-pitch.
Businesses that forget to pay their Delaware Franchise Taxes can run afoul in a few different ways. Failing to file by your assigned deadline means your business falls out of good standing. The state will assess a $200 penalty. Interest at the rate 1.5% is accrued monthly, on the 6th of each month. If a business fails to file and pay their Delaware Franchise Tax for two consecutive years, they are declared void. They’ll incur more fees and be forced to pay an additional renewal filing to get back in good standing with the state.
As always, the contents of this article should not be considered legal or financial advice. Have more questions about independent managers? We’re here to help.