Friday, September 2, 2011

Corporate Tax and Report Compliance Saves You Money and Time ... Really!

Let’s face it, in these tough economic times, it’s hard to shell out the fees and taxes required to maintain your company’s corporate status. But if you do the analysis, you will find that maintaining compliance actually SAVES you money. Here’s how:

Delaware Annual Franchise Report filing and tax fees are currently $125.00 for those corporations with less than 3,000 shares of authorized stock, adjusting upward for those corporations with a higher stock authorization. For a corporation paying the minimum tax, the day after the tax deadline, that amount doubles to $250.00, and the interest clock starts ticking. Yes, in just one day, non-compliance costs your company twice as much. Interest starts accruing at 1.5% a month on that unpaid tax balance, and can quickly spiral into a much larger debt. The next tax assessment rolls around in one year, and now you’ve added another $125.00 on top of what is already owed. At this point, many companies just can’t make the payment, another penalty is assessed and the corporate charter is voided by the State. The good news – the penalties and interest stop accruing. The bad news – no corporate charter means your company can no longer legally transact business and you’ve got to file a renewal of your charter, and pay all those back fees, plus fees for renewal! That initial tax assessment is starting to sound like peanuts right about now.

The cost of a renewal can average anywhere from $500.00 to $1,200.00, depending on the taxes due, the penalties incurred, and the interest accrued. Not to mention the cost of obtaining Certificates of Status, often required by your lender, financial institution or contract partners to PROVE your status. Not only is your company losing money, but you will be spending considerable time to obtain and file the paperwork necessary to get your company back into good standing, which can put many of your business dealings at significant risk – contract negotiations, licensing and permit applications, business lending and financing options – all of these require evidence of an active corporate charter. If you need that evidence quickly, you will be forced to expedite the filings to get what you need – and that costs even more money.

Here are some tips to help you maintain Corporate Tax Compliance and save your company time and money:

  • Pay attention to mailings and electronic communications sent by your Registered Agent. These notices contain important information about WHEN your filings are due, HOW to get them filed on time, and WHAT information is required.

  • Know the due dates. Delaware Corporate For Profit and Non-Profit Franchise Tax and Annual Report filings are always due on or before March 1, every year. Delaware LLC, LP and other alternative entity taxes are always due on or before June 1, every year.

  • Add a reminder to your calendar or tickler system. Give yourself as much time as you need to make sure you can allocate the funds required, and schedule the time necessary to complete the filing. Don’t forget to account for delivery time, if you choose not to file electronically! The date your filing is received by the State is the critical date, not the date you sent it.

  • Don’t wait until the last minute. Give yourself at least a few days cushion to get the filing in. You never know what may come up on the due date. If something prevents you from completing the filing by the due date, there is no “do-over”. The penalty and interest cycle begins. So, if you schedule the filing a week or so before it is due, and something prevents you from doing it on the designated day, you still have time. Just reschedule it for the next day, and follow through!

  • Designate a specific person in your organization to be responsible for Corporate Compliance and maintain contact with your Registered Agent. Many corporations inadvertently lose their corporate charter because no one person has been designated to take care of the filings. One officer/partner thinks the other has taken care of it, and vice-versa.

  • Keep your Registered Agent updated about changes with the corporation – has the Corporate Compliance contact person in your organization changed? Have you moved to a new office? Changed email servers or gotten new telephone numbers? All of these things can prevent your Registered Agent from delivering your Franchise Tax Notices and reminders to your company!

Making corporate tax and report compliance an important part of your organization’s business practices will, in the long run, save you considerable time and money, with very little effort. It is never too late to get started. If you find yourself in the situation of having to renew your corporate charter, or pay some of those fees associated with late filings, contact our office for assistance. Our experienced Corporate Specialists can assist you with obtaining status information and balances due, provide tax calculation tools and instructions, prepare and provide forms for renewal, and file reports and payments. Expedited services are available. Once your organization has been restored to good standing, use the tips provided to easily manage corporate compliance going forward, so you can spend your time and money on growing your business.

The Incorporators Ltd.
12 Timber Creek Lane
Newark, DE 19711
800.231.5593 fax

Delaware Corporate and Alternative Entity Formation
Registered Agent Services
Corporate Filing and Document Retrievals
Status Certificates
Annual Report Filings and Tax Payments
Corporate Supplies