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Every domestic or foreign corporation must file an annual report/franchise tax return with the Delaware Secretary of State on or before March 1, 2021. The easiest way to file this report is via the <a href="http://corp.delaware.gov/" target="_blank" rel="noopener">Delaware Secretary of State website</a>. If it is not filed on or before March 1, the corporation will also owe a penalty of $200 plus 1.5% interest per month on tax and penalty.

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To start, locate the corporation’s Delaware file number, which can be found by entering the corporation’s name on the <a href="https://icis.corp.delaware.gov/Ecorp/EntitySearch/NameSearch.aspx" target="_blank" rel="noopener">search page</a>.

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Next, go to the <a href="https://corp.delaware.gov/paytaxes/" target="_blank" rel="noopener">Annual Report and Tax Instructions page</a> to view instructions and begin the filing process. Click the <a href="https://icis.corp.delaware.gov/ecorp/logintax.aspx?FilingType=FranchiseTax" target="_blank" rel="noopener">Pay Taxes/File Annual Report link</a> at the top of the page. Enter the Delaware file number to pull up the annual report that must be filed and the state’s calculation of taxes owed based on the number of authorized shares of stock set forth in the corporation’s certificate of incorporation. But Delaware has two methods for calculating taxes owed and usually the corporation can significantly reduce the amount by using the alternative tax calculation method, which is not based on the number of authorized shares, but rather on the number of authorized and issued shares and gross assets as of the end of the reporting period (December 31, 2020). The gross assets figure should come from the corporation’s 2020 Form 1120 Schedule L.

The <a href="https://corp.delaware.gov/frtaxcalc/" target="_blank" rel="noopener">How to Calculate Franchise Taxes page</a> provides information on the two methods for calculating taxes and a calculator that allows users to plug in figures to compare taxes using the two methods.

The minimum franchise tax using the authorized share method is $175 and the minimum using the alternative calculation method is $400. In addition to the franchise tax, all corporations pay an annual report fee of $50.

The report also asks for the corporation’s federal employer identification number, principal place of business address, name and address of at least one officer, and names and addresses of all directors.

For additional assistance, call the Franchise Tax Section, 302.739.3073, option 3.

Note: All limited liability companies and limited partnerships also owe an annual fee of $300. There is no requirement to file an annual report.

Erin D. Borcherding 513.352.6591 <a href="mailto:Erin.Borcherding@ThompsonHine.com">Erin.Borcherding@ThompsonHine.com</a>

Lindsay Karas Stencel 614.469.3222 <a href="mailto:Lindsay.Karas.Stencel@ThompsonHine.com">Lindsay.Karas.Stencel@ThompsonHine.com</a>

Jonathon H. Vinocur 216.566.5722 <a href="mailto:Jonathon.Vinocur@ThompsonHine.com">Jonathon.Vinocur@ThompsonHine.com</a>

David J. Willbrand 513.352.6646 <a href="mailto:David.Willbrand@ThompsonHine.com">David.Willbrand@ThompsonHine.com</a>

This advisory bulletin may be reproduced, in whole or in part, with the prior permission of Thompson Hine LLP and acknowledgment of its source and copyright. This publication is intended to inform clients about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in it without professional counsel.

This document may be considered attorney advertising in some jurisdictions.

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Delaware Annual Reports/Franchise Tax Returns Due Soon

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