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Delaware Annual Report & Franchise Tax – Help! Part Five

Part Five of our Delaware Annual Report & Franchise Tax Series brings us to the assumed par value method for calculating Delaware franchise taxDelaware franchise tax. As we previously mentioned, franchise taxes are an annual fee paid to the State of Delaware Division of Corporations for your entity. There are two options for calculating the franchise tax amount due. There is the authorized shares method and the assumed par value method. Entities with a large number of shares carrying a low par value often times opt for the latter method of Delaware franchise tax calculation.

Per the Delaware Secretary of State Division of Corporations:
To use the assumed par value method to calculate Delaware franchise tax, “you must give figures for all issued shares (including treasury shares) and total gross assets in the spaces provided in your Annual Franchise Tax Report.  Total Gross Assets shall be those “total assets” reported on the U.S. Form 1120, Schedule L (Federal Return) relative to the company’s fiscal year ending the calendar year of the report.  The tax rate under this method is $350.00 per million or portion of a million.  If the assumed par value capital is less than $1,000,000, the tax is calculated by dividing the assumed par value capital by $1,000,000 then multiplying that result by $350.00.”

The example cited below is for a corporation having 1,000,000 shares of stock with a par value of $1.00 and 250,000 shares of stock with a par value of $5.00, gross assets of $1,000,000.00 and issued shares totaling 485,000.

  1. Divide your total gross assets by your total issued shares carrying to 6 decimal places.  The result is your “assumed par”.
    Example: $1,000,000 assets, 485,000 issued shares = $2.061856 assumed par.
  2. Multiply the assumed par by the number of authorized shares having a par value of less than the assumed par. Example: $2.061856 assumed par s 1,000,000 shares = $2,061,856.
  3. Multiply the number of authorized shares with a par value greater than the assumed par by their respective par value.
    Example: 250,000 shares s $5.00 par value = $1,250,000
  4. Add the results of #2 and #3 above.  The result is your assumed par value capital.
    Example:  $2,061,856 plus $1,250,000 = $3,311 956 assumed par value capital.
  5. Figure your tax by dividing the assumed par value capital, rounded up to the next million if it is over $1,000,000, by 1,000,000 and then multiply by $350.00.
    Example: 4 x $350.00 = $1,400.00
  6. The minimum tax for the Assumed Par Value Capital Method of calculation is $350.00.

Be sure to check back next week for the final blog in the Delaware Annual Report & Franchise Tax Series. In the meantime, feel free to reach out to us if you have any questions or need assistance with filing a Delaware annual report or paying Delaware franchise tax. We’re here to help!

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Delaware Annual Report & Franchise Tax – Help! Part Four

Today, in Part Four of our Delaware Annual Report & Franchise Tax Series, we start to break down Delaware franchise taxes. As weDelaware franchise tax previously mentioned, franchise taxes are an annual fee paid to the State of Delaware Division of Corporations for your entity. For corporations, the franchise tax fee is based on authorized shares, but for alternative entities, such as a limited liability company, the fee is a flat rate. Most Delaware entities are required to pay a franchise tax.  The Delaware franchise tax fee is in addition to the $50 state fee to file a Corporation Delaware annual report.

For entities using the authorized shares method of Delaware franchise tax calculation, the fees break down as follows:

  • $175 minimum tax for corporations with 5,000 shares or less.
  • $350 minimum tax for corporations with 5,001 -10,000 shares
  • Each additional 10,000 shares or portion thereof adds $75.00..
  • $200,000 maximum tax. (This is an increase from the previous maximum tax rate of $180,000.)

Examples:  A corporation with 10,005 shares authorized will pay $325.00. $250.00 + $75.00. A corporation with 100,000 shares authorized pays $925.00. $250.00 +  675.00 ($75.00 x 9)

Corporations that owe $5,000 or more in Delaware franchise taxes make estimated payments. The schedule for estimated franchise tax payments breaks down quarterly:

  • June 1st – 40% of total tax due
  • September 1st – 20% of total tax due
  • December 1st – 20% of total tax paid is due
  • March 1st – remainder of tax is due

Be sure to check back weekly or subscribe to the blog to follow along with the series. If you’re new to the Delaware Annual Report & Franchise Tax Series, click the hyperlink to start from the beginning. Next week we will cover the assumed par value method for calculating Delaware franchise taxes. As always, if you have a question in the meantime, feel free to reach out to us. We’d be happy to help you out!

 

 

 

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Delaware Annual Report & Franchise Tax – Help! Part Three

Today, in Part Three of our Delaware Annual Report & Franchise Tax Series, we continue to delve into the specifics of completing a Delaware annual report. If you’re new to the Delaware Annual Report & Franchise Tax Series, click here to start at the beginning.

When completing the Delaware annual report for a domestic profit corporation, certain information is mandatory for all filers. Once filed, this information is considered public record, with the exception of the gross assets and issued shares.Delaware annual report

  • End of fiscal year date – For corporations not using the last day of the calendar year, the date will need to be updated to specify your corporation’s fiscal year end date.
  • Principal place of business address and phone number – This is the physical location of the principal place of business for the location. Delaware Law requires the city, town, street and number. A post office box address is not accepted. You may use an international address.
  • One officer – Only one officer is required, though additional officers may be added. The first and last name, title, and address of the officer are required. The officer authorizing the report must be listed.
  • All directors – The names and addresses of all the directors as of the filing date of the annual report must be listed. The only exception to this rule is for an initial Delaware annual report or a Delaware annual report being filed in conjunction with a dissolution pursuant to Section 274 or 275(c) of Title 8.
  • Signature line – The name, title, and address (no PO Boxes allowed) of the authorizing person must be listed.
  • Gross assets & issued shares – When filing a Delaware annual report for a corporation not considered minimum stock, calculation information is also required. This includes total gross assets and issued shares.

Be sure to check back weekly or subscribe to the blog to follow along with the series. Next week we will begin to break down Delaware franchise taxes. As always, if you have a question in the meantime, feel free to reach out to us. We’d be happy to help you out!

 

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Delaware Annual Report & Franchise Tax – Help! Part Two

Last week we started off the Delaware Annual Report & Franchise Tax Series with the basics. If you missed the first blog, click here to get caught up. This week we’ll dig a little deeper into the Delaware annual report, as it pertains to profit corporations.

Where are the annual report & franchise tax notices sent? In Delaware, annual report and franchise tax notices are sent to the Delaware annual report agent of record, also known as your registered agent. The registered agent is then responsible for passing the notice along to you. This is one of the major reasons it’s imperative to keep your registered agent up to date with the most current contact information for your entity.

How and when are the Delaware annual report & franchise tax notices sent? In Delaware, the registered agent may send corporate annual report and franchise tax notices to you via email or regular mail. Notices usually begin going out to Delaware corporations at the end of December or beginning of January.

How can I file my Delaware annual report? The State of Delaware Division of Corporations requires all Delaware annual reports for profit corporations be filed online. This can be done by visiting the Division of Corporation’s website at www.corp.delaware.gov or by utilizing a registered agent. When utilizing a registered agent, you can have the agent file for you or use their filing portal that is tied directly to the State’s system (ours is Snapshot™ – if you want to know more about it, click here).

Be sure to check back weekly or subscribe to the blog so you don’t miss out on the rest of the details. Next week we will continue the series and talk more about the details of completing a Delaware annual report. Of course, if you have a question in the meantime, feel free to reach out to us. We’d be happy to help you out!

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Delaware Annual Report & Franchise Tax – Help! Part One

Last week when we discussed Annual Report Services (click here to read that blog), we mentioned most jurisdictions have annual filing Delaware Annual Report & Franchise Taxand/or tax requirements. Delaware is one of those jurisdictions that requires annual report filings and franchise tax payments. Depending on the entity type, both may be required or just one…but, we’ll get into those details later.  Since Delaware also happens to be the jurisdiction we seem to get the most questions about, we decided to tackle the subject in a series of blogs. Today we’ll start by answering just a few basic questions…

What is a Delaware Annual Report? This is a document filed annually with the State of Delaware Division of Corporations detailing pertinent company details. Information such as the Principal Place of Business, Officer and Director details, and stock information are included on the annual report. The stock information provided helps to determine the annual franchise tax due. Not all entities are required to file an annual report.

What is franchise tax? Franchise taxes are an annual fee paid to the State of Delaware Division of Corporations for your entity. For corporations, the franchise tax fee is based on authorized shares. For alternative entities, such as LLCs, the fee is a flat rate. Most entities are required to pay a franchise tax.

What entity types file an annual report and/or pay franchise taxes? When are they due?

Entity Type Annual Report Franchise Tax Due Date
Domestic Corporations Yes Yes March 1st
Exempt Domestic Corporations Yes No March 1st
Domestic Limited Liability Companies No Yes June 1st
Domestic Limited Partnerships No Yes June 1st
Foreign Corporations Yes Yes June 30th
Foreign Limited Liability Companies No Yes June 1st
Foreign Limited Partnerships No Yes June 1st
Delaware Statutory Trusts No No N/A
As mentioned above, these are just the basics. Over the next few weeks, we will continue to discuss Delaware annual reports and franchise taxes in more detail. Be sure to check back weekly or subscribe to the blog so you don’t miss out! Of course, if you have a question in the meantime, feel free to reach out to us. We’d be happy to help you out!

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Tell Me More About Annual Report Services

Annual Report Services are one of the truly invaluable ancillary services we offer our registered agent clients.

Most jurisdictions have annual filing and/or tax requirements. In order to stay in good annual report servicesstanding and maintain any legal protections your entity may provide, it’s important these obligations are fulfilled.

Why are Annual Report Services so invaluable?

For reasons we mentioned above, it’s important for your entity to remain active and in good standing. Failure to do so may result in penalty fees, a loss of good standing, and could ultimately find your entity involuntarily dissolved or its authority revoked. While it is usually possible to recover from these situations, it can be a major headache and the costs can really add up. So, why chance it? Annual Report Services are often compared to insurance, as they help insure you don’t miss these crucial deadlines.

To assist with remaining compliant, we offer two options for Annual Report Services:

Option One – Annual Report Monitoring Service (ARMS)

Annual Report Monitoring Service is a reminder service for those do-it-yourselfers who just want a friendly reminder when obligations are due for their entities. With ARMS, we will remind you 60 days ahead of the due date and again 30 days prior. When you get the reminder, you can either fulfill the obligation on your own or tell us you’d like us to handle it for you.

Option Two – Annual Report Filing Service (ARFS)

Annual Report Filing Service is an automated service for those of you who don’t want to worry about it. Think of it as the “auto-pay” feature for your credit card or electric bill. With ARFS, we proactively gather the information we will need to complete any annual filing requirements. When the due date(s) roll around, we prepare and file any reports and/or make annual payments, as well as send you proof of compliance and upload it to your Snapshot account (as available).

If you have any additional questions about or need assistance signing up for one of our Annual Report Services, feel free to reach out to us. We’re here to help make your life easier!

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How to Appoint an Independent Manager or Director in 3 Easy Steps

Appointing an Independent Manager or Director is an easy three step process. Chances are if you’re reading this, you already know what an Independent Manager or Director is and why you need one. So, the only question that remains is ‘How do I appoint an Independent Manager?’ (If you need a crash course in the what and why, you may want to check out one of our previous blogs about the topic by clicking here and/or here.) 

Step One – Operating Agreement Review
Once you’ve reached out to us to inquire about appointing independent representation, you will need to provide us Independent Managerwith a copy of the operating agreement, for review.

Step Two – The Contract
Next, we will provide you with a contract for the independent representation engagement, tailored to your specific needs. If it’s not already included within the operating agreement, you will also need to provide us the lender contact information at this time.

Step Three – Payment and Filing
Finally, when the independent representation contract is agreed upon, payment will be due, and we will sign the operating agreement.

We understand Independent Manager and Director engagements are time sensitive, so we do everything we can to make the process as quick, smooth, and seamless as possible. If you have any questions or need additional information regarding Independent Representation, please feel free to reach out to us.

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Independent Manager – Why?

In our blog “What is an Independent Manager?” we briefly touched on why an LLC would appoint an Independent Manager.independent manager - why? Before we dig a little deeper into the why of Independent Representation – did you know there are other names this special role goes by, dependent upon the type of entity? Independent Director, Springing Member, and Special Member are some of the other terms you will hear when referring to this special type of representation within a company’s board. An Independent Director and a Springing Member are both types of Special Members. A Springing Member is a member that sits dormant until an event triggers the need to bring the Member into action. This could then cause them to be an Independent Manager. For the sake of this blog, we’ll stick to discussing an Independent Manager on an LLC’s board of managers.

So, why appoint someone to this special role? There are various reasons for appointing this position, but a common motive for appointment is to protect the lender.    As an independent party with no financial relationship with the LLC, an Independent Manager simply fulfills their obligation as indicated in the operating agreement. This section of the operating agreement is drafted with consent by the lending party, so this independent party acts as a representative for the financial institution.

As long as there is a debt held by the lender or financial institution, the Independent Manager would remain active and required to vote in the interest of the lender or financial institution, including voting against bankruptcy, thus safeguarding the lender.

While the situations and names may vary, the role is rather consistent. If you have any questions about or need to appoint Independent Representation, just give us a call or email us.

 

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Legislative Changes in Nevada

Below is information we recently received through the National legislative changes in nevadaPublic Records Research Association (NPRRA) concerning legislative changes in Nevada. As an active member of the NPRRA, one of the many benefits is the continuous flow of information such as this between members regarding changes in policy, law, and processing of public records searching and filing across the US.

Notice of 2017 Legislative Impacts The 2017 Legislative session imposed several changes to certain requirements within Title 7 of the Nevada Revised Statutes. Below is a highlight of the changes. For further information and a complete list of bills, please refer to the Nevada Legislature website at: https://www.leg.state.nv.us

Assembly Bill 6 – Effective July 1, 2017 Removes an exemption from the requirement to obtain a state business license for businesses whose primary purpose is to create or produce motion pictures.

Assembly Bill 123 – Effective October 1, 2017 Revises provisions governing initial and annual lists and revises provisions relating to a series created by a limited-liability company. Each new business entity subject to Title 7 of the Nevada Revised Statutes shall file an initial list at the time of filing its organizational documents. If an amended list is filed within 60 days after the initial list is filed, the business entity shall not be required to pay a fee. If the articles of organization or operating agreement of a limited-liability company creates one or more series, the registered agent of the company shall be deemed to be the registered agent for each series of the limited-liability company. Each series may be served with any legal process, notice or demand required or authorized by law by serving the registered agent of the limited-liability company which authorized the creation of the series.

Senate Bill 41 – Effective October 1, 2017 Revises provisions governing the examination of the records required to be maintained by registered agents and revises the provisions governing the examination of records required to be maintained by certain business entities. The Secretary of State may conduct periodic, special or any other examinations of any records required to be maintained pursuant to this chapter or any other provision of NRS pertaining to the duties of a registered agent as the Secretary of State deems necessary or appropriate to determine whether a violation of this chapter or any other provision of NRS pertaining to the duties of a registered agent has been committed. Upon the request of the Secretary of State, a limited liability company shall provide the Secretary of State with the name and contact information of the custodian of records, if different from the registered agent for such company. Each limited partnership shall continuously maintain a principal office in this State, which may but need not be a place of its business in this State, or a custodian of records whose name and street address is available at the limited partnership’s registered office. A limited partnership shall maintain at its principal place of business in this State or with the custodian of records a current list of the full name and last known business address of each partner, separately identifying the general partners in alphabetical order and the limited partners in alphabetical order.

Assembly Bill 423 – Effective January 1, 2018 The Secretary of State shall work in consultation with the Nevada Commission for Women to design and conduct an annual survey of businesses in this State for the purpose of collecting data and information related to issues of gender equality in the workplace. The survey shall be offered through the state business portal at the time the business submits an online application or renewal for a state business license. The Secretary of State shall make the voluntary responses electronically available and searchable on the Internet website of the Office of the Secretary of State and shall annually compile the responses into a report and submit the report to the Governor and to the Director of the Legislative Counsel Bureau.

Assembly Bill 436 – Effective January 1, 2018 The Secretary of State shall ensure that the state business portal enables a person who applies for the issuance or renewal of a state business license to indicate whether the applicant is a minority-owned business, a woman-owned business or a veteran-owned business and shall provide information electronically concerning programs to provide financing for small businesses and information concerning the process by which the business may become certified as a disadvantaged business enterprise. The Secretary of State shall include and maintain the same information on its Internet website. The Office of Nevada Secretary of State

If you have any questions about how the legislative changes in Nevada may affect you or if you need assistance with forming or maintaining your entity in Nevada, please don’t hesitate to contact us.

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What is an Independent Manager?

This week’s informational blog covers the basics of what Independent Representation is byIndependent Manager answering the question – What is an Independent Manager?

A Limited Liability Company (LLC) is managed by a board of managers.  The board of managers oversees the activities of  an LLC.  An Independent Manager is a special type of manager appointed to the LLC’s board that has no equity relationship with the entity and thus is considered to be independent of the LLC’s ownership.  The role of this unique position is usually outlined in the LLC’s operating agreement.

So…Why would an LLC appoint an Independent Manager? Appointment of Independent Representation may be a lender or third party requirement in a transaction. This special position provides a level of security for the third party. (Think of it as insurance.) As we previously mentioned, the third party will detail the Independent Manager’s duties when drafting the operating agreement. These duties generally require the Independent Manager be a party to and vote in certain major board decisions. Again, the specific types of decisions the Independent Manager must give consent for are also outlined in the operating agreement of the LLC.  By requiring this unique position, the third party retains some control over the LLC without actively managing the entity.

These are just the basics. If you want to learn more, have questions about, or need to appoint Independent Representation, feel free to reach out to us. We would be happy to assist you. And don’t forget to keep an eye on our blog for more info to come…