Why Form a Corporation in Delaware?

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Delaware Corporation Taxes and Fees

Here’s a breakdown of the likely taxes and fees you’ll incur when you start and run a corporation in Delaware.

Delaware Corporation Fees

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Taxes Payable by Your Delaware Corporation

The way that Delaware S Corporations and C Corporations pay taxes is different. We’ll take each one separately.

Both S Corporations and C Corporations in Delaware Need to Pay These Taxes

Your Delaware Corporation Will Need to Pay Estimated Taxes

Most Delaware corporations will need to pay estimated taxes throughout the year, depending on the amount of income and profit you expect to make. The most common types of estimated tax are:

  • Federal income tax
  • Federal self-employment tax
  • Delaware state tax
  • Franchise tax, if high enough

Most Delaware S Corporations and C Corporations will pay estimated taxes four times a year. Speak to your accountant for more information.

Employee Insurance and Taxes for Your Delaware Corporation

You may also need to pay tax and insurance for any employees, like employee compensation insurance or unemployment tax. There will also be other requirements you have for employees.

Get more requirements from the Delaware Department of Labor website.

Taxes Payable by All Individuals Working for Delaware Corporations

Delaware Corporation Earnings, Dividends and Distributions Are Subject to Federal Income Tax

You will need to pay regular federal income tax when you file your tax return every year.

Delaware S Corporations — Additional Tax Liabilities

Self-Employment 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.

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You will be able to deduct your business expenses from your income when working out how much self-employment tax you owe. Here are some examples of how much self-employment tax you may need to pay, depending on your earnings:

  • On profits of $60,000, you would pay self-employment tax of $9,180
  • On profits of $90,000, you would pay self-employment tax of $13,770
  • On profits of $140,000, you would pay self-employment tax of $21,420
  • On profits of $160,000, you would pay self-employment tax of $24,480

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.

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Taxes Payable by Delaware C Corporations

Corporation Tax

Unlike the the Limited Liability Company and the S Corporation, a Delaware 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.”

Stock Dividends From C Corporations

A Delaware 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).

Ready to Start Your Delaware Corporation?

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 necessary forms on your behalf.

Our basic package also provides a free Registered Agent service for the first year. If you're looking for help starting an S Corporation or C Corporation, our comprehensive services provide outstanding value.

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Filing Time and Price

The state charges this amount to file a new business entity. This fee goes directly to the Secretary of State.

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Compliance Requirements

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.

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