Here’s a breakdown of the likely taxes and fees you’ll incur when you start and run a corporation in Delaware.
The way that S Corporations and C Corporations pay tax is different. We’ll take each one separately.
Your corporation will need to pay employer payroll tax on salaries paid to employees.
You will pay Delaware state income tax on your earnings. Find out more here.
If you’re selling products or services in Delaware you may need to pay a state sales tax. You can register and pay state sales tax here.
You may need to pay other taxes and fees, depending on the type of business you run. Learn about other Delaware taxes.
If you employ others, you will need to pay insurance and taxes to the state for each employee.
You will also need to pay regular federal income tax when you file your tax return every year. Note that you will be able to apply your standard deduction, personal exemption and business expenses to this tax.
Because your Delaware corporation income flows through to your personal tax return, you must pay self-employment tax (also known as FICA, Social Security or Medicare tax) on your earnings. This is typically at a rate of 15.3 percent. You will be able to deduct your business expenses from your income when working out how much self-employment tax you owe.
In some cases, part of the income from an S Corporation can be paid as a “distribution” rather than “salary” so it would not be subject to self-employment tax. Find out how this can save you money.
Unlike the Limited Liability Company and the S Corporation, a C Corporation is required to file a corporate tax return and pay corporation taxes on any profits. When those taxed profits are paid to shareholders as dividends, they will also be subject to taxation on that individual’s tax return. This is known as “double taxation.”
The income of the C Corporation is taxed at the corporate level and then again at the shareholder level. The standard corporation tax rate is 21 percent.
A C Corporation may pay shareholders dividends as a share of the profits of the company. The value of dividends that each shareholder is entitled to depends on how many shares they own.
Dividends that are distributed to shareholders are taxed twice, first at the corporate level as profit (on the corporation’s Form 1120) and again at the individual level as stock dividends (on the shareholder's Form 1040).
Incfile provides a cost-effective service to help you create your Delaware corporation. We guide you through the process and handle most of the administrative steps, such as filing the Articles of Incorporation/Certificate of Formation on your behalf. Our basic package also provides a free Registered Agent service for the first year.
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|State Fee||State Filing Time||Expedited Filing Time|
|$89||15 Business Days||5 Business Days|
This report is mandatory and must be filed within the specified time frame in order for the entity to remain in good standing with the state. Failure to file this report can lead to the company being revoked or administratively dissolved.
Due Date: June 1st
Filing Fee: $300
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