Delaware Annual Report: What you need to know before March 1st

How to avoid losing good standing or overpaying by tens of thousands under Delaware’s annual report and franchise tax rules.

You've probably received a kind reminder from your registered agent, corporate attorney, or Orbiss regarding the State of Delaware’s requirement to file and submit your entity’s annual report. Reports must be filed no later than March 1^st - if your company is incorporated in Delaware, or June 1^st - if it is formed in Delaware as an LLC or partnership.

Here's a friendly tip - these deadlines should be marked on your calendar with the same importance as April 15^th if you are filing for an extension, and October 15^th, which is the extended corporate tax return deadline.

1. What is the Delaware Annual Report?

You may have come across the terms Delaware annual report or franchise tax. While there isn’t a significant difference between the two, both are important mandatory requirements.

The annual report is the process of updating your company’s basic information, such as its business address, names of officers and directors, shares, and assets. Its purpose is to keep the state’s records current and accurate. The franchise tax, on the other hand, is the fee payable to the state of Delaware when submitting the filing, in order to maintain the privilege of legally existing as a business entity. Corporations calculate their franchise tax based on authorized shares or the "assumed par value" method, while LLCs and partnerships typically pay a flat annual franchise tax.

You should note:

• Corporations must file an annual report and pay franchise tax no later than March 1^st each year.

• LLCs and partnerships do not file an annual report, but they must pay their flat franchise tax by June 1^st each year.

A small but important detail - if the due date falls on a weekend, do not assume the state of Delaware will grant an extra day. Your report and payment must be submitted no later than March 1^st  or June 1^st - no exceptions. The state of Delaware isn't quite as flexible as the IRS, but you can still reach a representative by phone or chat if needed during those days.

2. What's at stake if you miss the deadline?

Not a million-dollar question - but certainly an important one.

The first thing to keep in mind is that penalties and interest will begin to accrue on your franchise tax balance until the filing is submitted and paid in full. These additional charges can add up quickly. The second is that during this period, your entity will no longer be in “good standing” with the state, which can delay certain processes.

Here are a few examples:

• If your company is going through an investment process, a certificate of good standing will be requested from your state of incorporation or formation. This certificate will not be available until your entity has been restored to good standing with Delaware.

• Banks periodically verify your company’s status by requesting a certificate of good standing. If your entity is not in good standing, this may delay transactions or create compliance issues.

• If you plan to register your company to do business in another state (foreign qualification), a certificate of good standing from your state of incorporation or formation is required as part of the application process. Without it, your registration cannot be completed.

The third thing to be mindful of - if the situation remains unresolved for too long, your company may eventually be declared void, canceled, or inactive for failure to comply with state requirements. This will not happen overnight, however, the annual report and franchise tax must be submitted as soon as you become aware of the noncompliance.

3. How Much Do You Actually Owe?

Now, this might be the million-dollar question.

Let’s answer the simple question first:

• For Delaware LLCs and partnerships - it is typically a flat annual franchise tax of $300, regardless of income or activity. No choice, this is the amount to pay.

• For a Delaware corporation - the franchise tax is calculated using either the authorized shares method or the assumed par value capital method.

Typically, for Delaware corporations, the minimum tax fee is $225 with no obligation to declare any shares or assets. It can reach $200,000 per year (or more, for certain large corporations). This amount varies depending on the number of authorized shares and the company’s financials. Since the calculation method can significantly impact the amount due (especially for corporations), it is important to review your company’s structure carefully to determine the most favorable and accurate calculation.

• Authorized shares method:
  Based purely on the number of authorized shares your corporation has.
  

• Assumed par value capital method:
  Calculated using the corporation’s total gross assets divided by the number of issued shares.

When we file your annual report:

• Step 1: We enter the number of authorized/issued shares your corporation has.

• Step 2: We enter the total gross assets as of January 31^st (most of the time)

The system then calculates the tax both ways and automatically applies the lower of the two amounts. So, technically, you don’t need to actively "choose" - the form does it for you. The key is providing accurate numbers for both authorized/issued shares and issued shares/assets.

One otherthing to pay attention to is to make sure your balance sheet numbers are correct, because Delaware can verify them and may audit if they seem inconsistent. For more information outlining the calculation method, please visit the State of Delaware's website.

4. Your Pre-Filing Checklist

To wrap up, here's a quick checklist of the key information to complete your report:

Before you log into the Delaware Division of Corporations portal, ensure you have these four things ready:

• Your 7-digit Business Entity File Number: You can find this on your original Certificate of Incorporation or by searching the Delaware entity database.

• Total Gross Assets: This number must come from your most recent federal tax return (specifically Form 1120, Schedule L). If you haven't filed your 2025 taxes yet, use the figures from your year-end balance sheet.

• Issued Shares Count: The exact number of shares held by founders, employees, and investors as of December 31st.

• Director Information: You are required to list the names and addresses of all current directors and at least one officer.

 One more tip (and we promise this is the last one), Orbiss is your partner every step of the way! We're committed to helping you maintain your entity’s compliance while making the process as smooth and simple as possible.

Reach out to make sure you're compliant and ahead of the deadlines.