Delaware Business Taxes

Delaware’s tax structure is very favorable for businesses. Its corporate income tax is a flat 8.7%, and no local taxes are added. Similarly, its personal income tax is lower than most states. It also does not have a sales tax or inventory taxes, which can save companies money.

Delaware allows business owners to form an LLC, C-Corp, S-Corp, or partnership. All of these entities are eligible for pass-through taxation, meaning that income or losses are passed through to the shareholders. This is a great way to reduce quarterly taxes. Additionally, the state does not tax intangible assets, which can reduce costs for companies that generate royalties from art, music, or books.

The only state taxes that apply to Delaware businesses are the gross receipts tax and withholding tax. These taxes are based on your company’s annual revenue. The state calculates the amount owed using the Assumed Par Value Capital method. Most Stripe Atlas customers find that their total tax owed decreases when using this method. You can pay your Delaware business taxes online or by check.

How to Pay Delaware Business Taxes?

In Delaware, business taxes are levied at the state and county levels. Some municipalities impose local taxes, but these are usually relatively low. As a result, the state is able to offer lower corporate income tax rates than many other states, attracting startups and businesses from across the country.

All corporations must pay a franchise tax to the state of Delaware. The amount of the tax depends on how many outstanding shares the company has. If you are unsure how much you owe, the state’s website can help. It will automatically calculate your tax using the Authorized Shares Method, but you can also use the Assumed Par Value Method to determine a different number.

The state of Delaware also collects withholding taxes from employee wages. These withholdings are deposited into the state’s Withholding Accounts Fund, which is used to pay the state’s franchise and gross receipts taxes.

To file your Delaware business taxes, you must register your company through the state’s One Stop online portal. You must provide your seven-digit Delaware business entity file number and your legal name. Once registered, you can submit your annual reports and taxes. You must also pay quarterly estimated payments if you expect to owe more than $400 in tax.

Delaware Business Tax Due Dates

The Franchise Tax due date for corporations is March 1. Failure to file and pay on time will result in a $200 late penalty plus 1.5 percent interest each month.

The due dates for LLCs and other entity types vary, but most are monthly or quarterly. Atlas recommends consulting with a qualified professional to help file Delaware taxes and other state or federal taxes, as the requirements are complex.