DOVER– In an effort to align Division of Corporations fees with true cost of service provided, Rep. Kerri Evelyn Harris and Sen. Bryan Townsend introduced House Bill 400 Thursday- legislation that makes several increases to the annual fees paid by LLCs and other Alternate Entities, as well as the fees associated with various services provided by the Division of Corporations.
Delaware is the legal home of more than 2,000,000 business entities and over 66% of the Fortune 500. Overseen by the Division of Corporations, the taxes and fees collected from these entities account for about 37% of the state’s total revenue, which is approximately $2.56 billion.
Within that, Alternative Entities fees and Business Entity/UCC fees currently make up roughly 10% of the state’s revenue.
Alternative Entities refer to General Partnerships (GPs), Limited Liability Companies (LLCs), Limited Partnership (LPs), Registered Series of LLC/LPs, and Limited Liability Partnerships (LLPs)/Limited Liability Limited Partnerships (LLLPs). Each June, these entities pay an annual fee, which goes directly to the state’s General Fund.
The last time this fee was increased was in 2014. Under HB 400, there would be a $100 fee increase for GP, LLC, and LPs, rising from $300 to $400, a $25 increase for Registered Series of LLC/LPs, rising from $75 to $100, and a $100 increase per partner for LLPs/LLLPs, rising from $200 to $300.
Combined, these fee increases are expected to generate approximately $150 million in additional revenue each year.
“We are facing a budget deficit. At a time when federal support is uncertain, we must ensure our state resources are sufficient to support Delawareans’ needs. That means reviewing every revenue source and expenditure in our state with a fine-toothed comb, and making changes where they make sense and where they won’t hurt our residents and the businesses that help our state thrive,” said Rep. Kerri Evelyn-Harris.
The Division of Corporations did not record any decrease in the number of LLC formations as a result of the fee increase in 2014.
While large corporations utilize Delaware to register as an LLC, so do many small businesses. That is why these fee increases were limited to $100 annually, or roughly $9 a month for the average small business.
This 33% increase also remains under the overall federal inflation increase in the same time period, which, according to the Bureau of Labor statistics, increased 40% since January 2014. $300 in 2014 is equivalent to $417 today.
As the administrative center for corporate governance in Delaware, the Division of Corporations provides a number of services to businesses, including filings, processing and delivering legal documents, preclearance, validation preclearance, data searches, trademark registrations, and dissolutions.
There is a fee attached to each service provided by the Division. However, a large majority of those fees have not been adjusted since the 1990s, and no longer align with the true value and the level of work required for these services.
| Service | Current Fee | Fee Proposed Under HB 400 | Last Fee Increase |
|---|---|---|---|
| Bank or Trust Company Filing | $28.75 | $300 | 1991 |
| Delaware Workers Cooperative Act Filing | $100 | $200 | Enacted in 1996 |
| Delaware Workers Cooperative Act Certified Copy – 1st Page | $20 | $50 | 1996 |
| Delaware Workers Cooperative Act Certified Copy – Each Additional Page | $1 | $2 | 1996 |
| Delaware Workers Cooperative Act Non-Certified Copy – 1st Page | $5 | $10 | 1996 |
| Delaware Workers Cooperative Act Non-Certified Copy – Each Additional Page | $1 | $2 | 1996 |
| Service of Process (All Entities) | $50 | $100 | 1990 |
| Preclearance (All Entities) | $250 | $350 | 1990 |
| Report Fees | $100 | Up to $200 | 2019 |
| Trademark/Service Mark Application | $25 | $100 | 1976 |
| Trademark/Service Mark Registration Issued | $10 | $50 | 1976 |
| Short Form Dissolutions | $10 | $50 | 1976 |
| Foreign Corporation Annual Report Filing Fee | $125 | $250 | 2009 |
| Foreign Corporation Annual Report Penalty | $125 | $200 | 2009 |
| Validation Preclearance | $250 | $1,500 | 1990 |
The total revenue increase from these fee changes would be approximately $1.75 million.
All together, HB 400 is expected to generate approximately $152 million toward the State’s General Fund.
“During February’s Joint Finance Committee hearings, we heard compelling cases from our agency partners across the State about their operating budget requests and capital requirements to sufficiently serve the people of Delaware,” said Sen. Trey Paradee, chair of the Joint Finance Committee.
“HB 400 is a responsible way to raise the revenue we need to balance our budget and ensure that we can continue funding the critical services that make Delaware an attractive place to live.”
HB 400 has been assigned to the House Administration Committee.
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