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DELAWARE

Why Form a Limited Liability Company (LLC) in Delaware?


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The Business Taxes Payable by Your Delaware LLC

There’s a wide variety of business taxes that your Delaware LLC will need to pay. These include tax that’s payable to the Delaware government, like Delaware state tax. You will also need to pay federal, self-employment and possibly payroll tax to the IRS.

If you want help with your taxes, Incfile provides a complete Business Tax Filing service.

How Your Delaware LLC Will Be Taxed

The profits of a Delaware LLC are not taxed at the business level, like those of C Corporations. Instead, tax for a Delaware LLC works as follows:

  1. Delaware LLC owners pay self-employment tax on business profits
  2. Delaware LLC owners pay DE state tax on any profits, less state allowances or deductions
  3. All LLC owners pay federal income tax on any profits less federal allowances or deductions
  4. Employers pay payroll tax on any salaries they pay to employees
  5. Employees pay federal, state and payroll tax on their earnings

Items 1, 2 and 3 are taxed as “pass-through” income for any LLC owners, managers or members who receive profits from the business. Any profits are reported on federal and Delaware personal tax returns, and that’s where you will pay those taxes.

Delaware Taxes Payable to the DE Division of Revenue

There is one main type of tax that you will pay to the Delaware Division of Revenue: Delaware state income tax. As a Delaware business owner, you will need to pay DE state tax on any money you pay to yourself. These earnings flow through to your personal tax return, which is where you will pay Delaware income tax. You will be taxed at the standard rates for Delaware state taxes, and you will also get to apply regular allowances and deductions.

Any salaried employees will also need to pay personal Delaware state taxes. The Delaware state tax rates are levied by how much you earn. You can find the DE state tax rate schedule here.

Get details on the Delaware state tax online here.

Delaware Sales Taxes on LLC Sales

Unlike most other states, Delaware does not collect sales taxes.

Federal Taxes for Your Delaware LLC: Self-Employment and Income Taxes

There are a couple different federal taxes that every LLC will need to pay, including Delaware LLCs. These are self-employment tax and federal income tax, which are taxed as “pass-through” income via your tax return forms.

Delaware LLC Federal Self-Employment Tax

All Delaware LLC business members or managers who take profits out of the LLC will need to pay self-employment tax. This tax is also known as FICA, Social Security or Medicare tax. It applies to all the earnings you withdraw from your Delaware business. The current self-employment tax rate is 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. Here are some examples of how much self-employment tax you may need to pay, depending on your earnings:

  • On profits of $50,000, you would pay self-employment tax of $7,650
  • On profits of $90,000, you would pay self-employment tax of $13,770
  • On profits of $120,000, you would pay self-employment tax of $18,360
  • On profits of $160,000, you would pay self-employment tax of $24,480

Pay Less Self-Employment Tax by Treating Your Delaware LLC as an S Corporation

The Internal Revenue Service allows LLCs to ask to be treated as an S Corporation for tax purposes. This can help you reduce the amount of self-employment tax that you pay by declaring some of your income as salary and other income as distributions or withdrawals.

You can do this by making an “S Corporation Tax Election” with the IRS using a form known as Form 2553. We can file your Form 2553 with the IRS on your behalf.

Incfile Form 2553 S Corporation Tax Election for an LLC service

Speak to your accountant for more information on reducing your Delaware LLC self-employment tax through an S Corporation tax election.

Delaware LLC Federal Income Tax

You must also pay regular federal income tax on any earnings you take out of your Delaware LLC. The amount of income tax you pay depends on your earnings, current income tax brackets, deductions and how you file.

You only pay federal income tax on your Delaware LLC profits that you take out of the business, less certain deductions and allowances. This includes your tax-free amount, plus LLC business expenses and other deductions for areas such as healthcare and some retirement plans. Speak to your accountant for more information.

Employer and Employee Taxes for Your Delaware LLC

If you pay employees, there are some slightly different tax implications. Speak to your accountant to get clear guidance for your own unique situation.

Delaware LLC Employer Payroll Tax Withholding

All employers must collect and withhold payroll tax from their employees when they receive their salaries. You would normally withhold 7.65 percent of the taxable salary that you pay to your employees.

Delaware LLC Federal and State Tax Withholding

You may also choose to withhold federal and Delaware state income tax on the wages you pay to employees. Speak to your accountant for more information.

Employees May Need to File Tax Returns

Regardless of whether you withhold federal and Delaware state income tax, your employees may need to file their own tax returns.

Delaware LLC Employee Insurance and Other Requirements

You may also need to pay 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.

Other Taxes and Duties for Your Delaware LLC

Depending on the industry you are in, your Delaware LLC may be liable for certain other taxes and duties. For example, if you sell gasoline you may need to pay a tax on any fuel you sell. Likewise, if you import or export goods you may need to pay certain duties. Speak to your accountant about any other taxes you may need to withhold or pay.

Estimated Taxes for Your Delaware LLC

Most Delaware LLCs 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

Most Delaware LLCs will pay estimated taxes four times a year. Speak to your accountant for more information.

FAQs on Delaware LLC Business Taxes

Does Delaware Have Sales Tax?

No, Delaware does not have a sales tax.

Does Delaware Have a State Tax?

Yes. Delaware does have a general state income tax. You can find more information above.

What Is the Sales Tax Rate in Delaware?

There is no sales tax in Delaware, so the sales tax rate is zero.

Do I Need to Pay Estimated Taxes?

Yes. In most cases you must pay estimated taxes on your Delaware tax, federal income tax and self-employment tax. Speak to your accountant for more information.

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What are the fees and requirements to form a business in Delaware?

Filing Time and Price

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

State Fee State Filing Time Expedited Filing Time
$90 15 Business Days 5 Business Days

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.

Delaware Franchise Tax Report

Frequency:  Annually

Due Date:  June 1st

Filing Fee:  $300

Learn more about starting a business in Delaware

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