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
Learn about standard filing costs here for DE corporations.
A yearly fee when you file your Franchise Tax report.
These are the fees for creating or renewing your licenses and permits on a regular basis. These depend on the type of Delaware corporation you’re operating and where you’re located.
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 employer payroll tax to the IRS on salaries paid to employees.
Anyone who takes earnings out of your Delaware corporation will need to pay Delaware state income tax. Find out more on the Delaware Division of Revenue website.
The state of Delaware does not charge sales and use tax, but if you sell products or services in a state other than Delaware, you may be liable. Check with your accountant or tax attorney.
You may need to pay other taxes and fees, depending on the type of Delaware corporation you run. Find out more on the Delaware Division of Revenue website. One type of fee that you will need to pay is when you file your annual Franchise Tax report, with fees due as follows:
“All corporations incorporated in the State of Delaware are required to file an Annual Report and to pay a franchise tax. Exempt domestic corporations do not pay a tax but must file an Annual Report. The Annual Report filing fee for all other domestic corporations is $50.00 plus taxes due upon filing of the Annual Report.
Taxes and Annual Reports are to be received no later than March 1st of each year. The minimum tax is $175.00 for corporations using the Authorized Shares method and a minimum tax of $400.00 for corporations using the Assumed Par Value Capital Method.
All corporations using either method will have a maximum tax of $200,000.00 unless it has been identified as a Large Corporate Filer, then their tax will be $250,000.00. Taxpayers owing $5,000.00 or more pay estimated taxes in quarterly installments with 40% due June 1, 20% due by September 1, 20% due by December 1, and the remainder due March 1. The penalty for not filing a completed Annual Report on or before March 1st is $200.00 Interest at 1.5% per month is applied to any unpaid tax balance.
Although Limited Partnerships, Limited Liability Companies and General Partnerships formed in the State of Delaware do not file an Annual Report, they are required to pay an annual tax of $300.00. Taxes for these entities are due on or before June 1st of each year. Penalty for non-payment or late payment is $200.00. Interest accrues on the tax and penalty at the rate of 1.5% per month.”
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.
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.
File Your Delaware S-Corp Tax Election with IncfileTaxes 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).
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