Effective July 1, 2014, for the tax year 2014 and thereafter, Delaware franchise tax has increased. The amount of the new franchise tax fee is dependent upon the entity type. Following are the details.
Every domestic and foreign limited liability company (LLC) and limited partnership (LP) registered in the state of Delaware will now owe $300 per year. The previous amount was $250 annually.
Every domestic corporation that has 5,000 authorized shares or less will now owe $175 per year. This is an increase of $100 over the previous amount of $75 annually, plus the required annual report fee of $50.
Every domestic corporation that has more than 5,000 authorized shares, but less than 10,000 authorized shares will owe $250 (instead of the previous amount of $150) plus $75 on each 10,000 authorized shares or part thereof. This is in addition to the required annual report fee of $50.
In summary, the bill increases the franchise tax amounts assessed on limited liability companies and limited partnerships by $50. It also raises the corporation franchise tax amounts by $100 for those entities that file using the authorized shares method.
The Delaware Senate has passed legislation and the Governor has signed into law a new corporate filing called a Certificate of Validation. The Certificate of Validation will become effective April 1, 2014 and the cost for filing is $2,500.
The new law allows corporations to file a Certificate of Validation stating there was miscommunication(s) and or error(s) that occurred previously. In other words, if proper approval was not given or subsequent changes were not properly recorded/filed with the Delaware Division of Corporations (the “Division”), a Certificate of Validation can now be filed correcting the miscommunication(s) and or error(s).
Note: If a corporation reduces their shares of stock and/or par, files its annual report and pays a large amount of taxes, then subsequently files a Certificate of Validation to correct the record, no overpayment will be refunded. However, if the Certificate of Validation shows a prior increase in authorized shares, additional franchise taxes may be due.
Following please find several changes to Delaware law that became effective August 1, 2014.
Currently Delaware statutes require each entity provide to its registered agent the name, business address and business telephone number of a person designated as the “communications contact” for the entity. This “person” must be a natural person and may not be another entity. Two new Acts expand on this designation.
1) House Bill # 327 – If requested by its communications contact, the limited liability company (LLC) must now be able to provide him/her with the name, business address and business telephone number of a natural person who has access to the name and last known business, residence or mailing address of each member and manager of the LLC. Click here for additional clarification of this responsibility, as well as other changes included in the Act.
2) House Bill # 328 – Sets forth similar requirements as HB 327 with regard to the communications contact except it applies to limited partnerships and the provision of information regarding each partner. Click here for additional clarification of this responsibility, as well as other changes included in the Act.
House Bill # 329 – Several changes were made to the General Corporation Law including those pertaining to actions where there may be limitations on an incorporator’s availability to act, and the filing of Certificates of Amendment to delete certain Certificate of Incorporation information, as well as additional provisions. Click here for additional information regarding these, as well as other changes, included in the Act.
House Bill # 364 – This bill provides for restrictions on the use of the word “bank” in the names of statutory trusts. For more information on this and other changed provisions, see here.