ANNUAL DELAWARE CORPORATION FILING AND FRANCHISE TAX OBLIGATIONS
Delaware corporate law requires that all Delaware corporations file an annual report and pay any applicable taxes and fees before March 1st of each year. These taxes include the franchise tax – a recurring annual charge required of each Delaware corporation in order to maintain its business registration in good standing.
Delaware recently approved revisions to the Corporation Franchise Tax statutes (8 Del. C. §§501-518) that change the manner in which the annual report is filed and the franchise tax is paid. These changes become effective on January 1, 2008. The most important changes are noted below.
The new law emphasizes that a corporation must file a “complete” annual franchise tax report. While the information required to be filed with the report has not changed, the level of scrutiny regarding the review of the completeness and accuracy of the information has increased. Under the revised law, if the Delaware Secretary of State’s Office, upon review of the annual franchise tax report, determines that the report is not “complete” or that the appropriate franchise fee has not been paid, the Secretary of State is prohibited from issuing a certificate of good standing for such corporation.
Previously, the statute provided that failure to pay the appropriate franchise tax within one year would cause the charter to become void and all corporate powers to be considered inoperative. The recent changes add the failure to file a “complete” report within one year as automatic grounds to void the charter and declare all corporate powers inoperative. The Attorney General may seek an injunction against any corporation that is three months or more in arrears of payment of the franchise tax to restrain the corporation from the exercise of any franchise or the transaction of any business in the state.
CHANGES TO THE NOTIFICATION AND FILING PROCESS
In preparation for these changes, the Delaware Secretary of State has revised the way in which annual report notifications are being distributed. Previously, the Secretary of State’s Office would print and mail a paper copy of the annual report and a separate instruction sheet. This year, in place of the pre-printed annual report, each Delaware corporation will receive a postcard notification that will include instructions for e-filing the annual report and e-paying the franchise tax.
DELAWARE’S E-CORP ONLINE FILING
In order to prepare for the mandatory requirement that all annual reports and franchise tax payments be filed electronically, Delaware is offering a site that enables all Delaware business entities an online option to pay their franchise or annual taxes as well as file their annual reports. You can access the site at https://delecorp.delaware.gov/eCorp/FilerHome. Once you are at the site, the navigation bar on the left side enables you to file the annual report, amend the annual report, pay a delinquent tax bill, or take care of a void warning. You will need to know the corporation’s seven-digit file number in order to file the report and pay the taxes on the site. Payment by Visa, MasterCard, or Discover is currently accepted.