Delaware Corporate Income Tax

Delaware corporate tax structure and the laws that govern different business structures have unique implications for companies operating in the state. These can affect everything from where a company is located to whether it pays federal and state taxes.

In addition to the federal income tax, businesses are also responsible for paying Delaware franchise and LLC taxes. The annual franchise tax is due by March 1 each year, and the state requires that all domestic and foreign corporations pay this fee. The Delaware franchise tax is based on the number of authorized shares of stock. The state provides a calculator and two tax calculation methods: the Authorized Shares Method and Assumed Par Value Capital Method.

Delaware Corporate Tax Structures

Delaware has two main corporate tax structures:

Corporate income tax: This is a flat 8.7% tax levied on taxable income generated from business activities within the state. It’s important to note that Delaware uses a three-factor formula to apportion income, so out-of-state activity is taken into account.

Franchise tax: This is a yearly franchise tax that all corporations registered in Delaware must pay, regardless of their income or activity level. The franchise tax has a minimum of $175 and a maximum of $250,000 (or $200,000 for most corporations).

Key Notes About Delaware Corporate Income Tax
Delaware Corporate Income Tax 1

Key Notes About Delaware Corporate Income Tax

Here are some additional details to keep in mind:

  • Delaware does not have a state-level S corporation tax.
  • There is no corporate income tax on income earned outside of Delaware (unless the corporation has nexus in another state).
  • Delaware has a gross receipts tax, but this applies to specific industries like certain financial institutions and utilities.

How to Pay Delaware Franchise Taxes

All Delaware C corporations are required to pay a franchise tax, and the amount can vary greatly depending on the company’s structure. For example, VC-backed startups with large option pools can easily end up with thousands of dollars in taxes due. It’s important to work with a CPA who understands the ins and outs of Delaware franchise tax so your startup avoids surprises and doesn’t get penalized.

To pay your Delaware franchise tax, visit the state’s website and fill out the form. You’ll be asked to provide your company information and payment details. Once you’ve entered this information, click the “Submit” button to complete your payment. You can choose to make your payment by credit card or ACH.

The State of Delaware requires all businesses to file an annual report and pay a $50 filing fee. You can file your report online with the Delaware Secretary of State. To file, you will need your 7-digit Business Entity File Number and director/officer information. The fee can be paid with a credit card or by electronic check.

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