By: Hank Brown
If you have started a Delaware Corporation, it shouldn’t come as a shock that the Delaware Secretary of State’s Office will at some point want a piece of the pie. This is known in Delaware as the “Annual Report and Tax Filing,” which needs to be submitted no later than March 1 of each calendar year.
This filing window is somewhat inconvenient for most businesses, as it is a rarity for their corporate tax returns with the IRS to have been filed this early. The Delaware Annual Report requires the total “Gross Assets” of the entity to be disclosed, which is found on Schedule L of the corporate tax return.
That being said, it is acceptable to use an estimation of the gross assets total if you do not have it on hand, and then file an amendment with Delaware once the corporate tax returns have been completed.
Below is the information you will need to gather prior to filing the Delaware Annual Report and Tax Filing:
- The Entity Filing Number found on the Delaware Articles of Incorporation or by searching for the entity name here.
- The total number of shares issued to date by the corporation, typically found in the Share Purchase Agreements and/or Board Consents.
- The corporation’s Gross Assets total, found in Schedule L of your corporate tax return with the IRS.
- The street address for the Principal Place of Business of the corporation.
- The preferred business email address and phone number for the corporation.
- The names, titles, and addresses of all corporate Officers and Directors of the corporation.
Once this information is acquired, you’re ready to get started! First, you will need to head to https://corp.delaware.gov/paytaxes/ and select the “Click Here to Pay Taxes/File Annual Report” button. You will then be prompted to enter your corporation’s “Business Entity File Number.”
After entering your Entity File Number, you will arrive at a dashboard that displays the current tax year (and prior years if the entity has previously submitted returns). Find the tax year you are filing for and click “File Annual Report.”
You will then arrive at a page that looks overwhelming at first glance but is quite straightforward once you realize what you’re staring at.
First is the “Stock Details” section. This is where you will note the total number of shares issued to date by the entity. This can be found in the entity’s Stock Purchase Agreements, or Board Consents. If there are multiple stock classes between Common and Preferred shares, you will need to divvy up the issued shares into each class. Your business attorney or CPA may be able to assist with this step by checking the corporation’s cap (short for capitalization) table(s).
Once you have noted the shares, you will insert the Gross Assets total that you already gathered from Schedule L of the corporate tax return with the IRS. As a reminder, if the tax return has not been filed as of March 1, you may put a placeholder estimation in this section and then file an amendment Delaware Annual Report once the tax return has been taken care of.
Finally, you will note the “Asset Date,” which is typically be December 31 of the tax year you’re working on. After you have entered all the appropriate information, click “Recalculate Tax” and suddenly the tax amount due in the upper right-hand corner magically drops from an obscenely large amount to one that is far more reasonable—typically around $450 for most small businesses. However, this is subject to change depending on the values that have been entered in the other sections.
Now for the easy part! Simply enter the information you have gathered for the remaining “Principal Place of Business,” “Officer Information” and “Director Information” sections. Be sure to not enter the corporation’s Delaware Registered Agent address in the “Principal Place of Business” section.
Once you have completed the sections above, enter the name, address and title of the Officer filing the report and click the green “Continue Filing” button. You will need to review the return in its entirety before you are prompted to submit payment for the total taxes due.
And that’s it! Not too bad right? It’s important to note that this article is not a one-size-fits all guide to submitting this filing, as some details are subject to change depending on the information that is entered. We hope that it at least gets you off to a good start!
If you’re thinking that this still sounds like too much of a headache, Bend Law Group is here to help file the return on your behalf. We have submitted hundreds of these filings for our clients, so do not hesitate to reach out via email at info@bendlawoffice.com, by phone at (415) 633-6841, or by visiting our Contact page here.
Disclaimer: This article discusses general legal issues and developments. Such materials are for informational purposes only and may not reflect the most current law in your jurisdiction. These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction. Bend Law Group, PC expressly disclaims all liability in respect of any actions taken or not taken based on any contents of this article.