Delaware LLC Tax: Everything You Need to Know
If you need help with your business taxes, you can post your legal need on UpCounsel’s marketplace. 3 min read
What is Delaware LLC Tax?
The Delaware LLC Tax, the franchise tax for a limited liability company situated in the state of Delaware, requires that a standard fee of $300 be paid each year by June 1st. If the Delaware Secretary of State doesn’t receive payment by this time, an LLC that has failed to pay will incur a fine of $200. Obviously, these payments only pertain to companies based in Delaware. LLCs based elsewhere will send a different sum to the office of their state’s Secretary of State.
Your Registered Agent's Annual Fee
As an LLC based in Delaware, your company is legally obliged to nominate a resident of the state as a Registered Agent. A Registered Agent will handle all of your company’s legal matters, and all legal documents either leaving or entering your office will pass through them. You can nominate a person or business, or even a co-owner of your LLC (but not the LLC itself) if they are authorized.
Your Registered Agent will charge an annual fee, though fees will vary depending on who you choose. Some companies may offer you an LLC formation package that entitles you to free months of agent service, after which you can nominate a new agent or continue with the company for a fee.
What Is the Cost to Incorporate in Delaware?
If you want to incorporate your LLC in the state of Delaware, state fees are a minimum payment of $89. The state also gets $90 in Delaware LLC fees when your Delaware LLC formation is filed.
Ongoing Delaware Corporation Fees and Taxes
When starting your LLC, you’ll likely want to have an idea of what you’ll owe in state taxes in a given year. Once your business becomes incorporated in Delaware, you’ll need to pay an annual franchise tax. What you pay in franchise taxes will depend on your tax calculation method.
Authorized Shares Method: Use this calculation method and Delaware franchise taxes start at $175 annually for a company with 5,000 authorized shares of stock or less. Payments rise to $250 for a company with between 5,000 and 10,000 authorized shares, and an additional $75 is charged for every additional 10,000 authorized shares after that.
After you’ve calculated your franchise taxes using one of those two methods, see if your LLC owes more than $5,000. If it does, you’ll need to pay quarterly estimated taxes during the next tax year. Calculating from your previous year’s filings, you’ll owe 40 percent of your annual taxes on June 1, 20 percent on September 1, 20 percent on December 1, and the final 20 percent on March 1.
In Delaware, the tax benefits for corporations are many and should be seized upon by all business owners.
Ongoing Delaware LLC Fees and Taxes
Because your LLC is based in Delaware, you won’t need to file an annual report. You will, however, need to pay an annual tax of $300. You should also consider additional fees if you plan on hiring tax professionals to help with filing. Ongoing fees with agencies will vary.
What Kind of Tax Will You Owe On Delaware Business Income?
Form an LLC in any U.S state and you’ll likely have your business income taxed, though some states lack either corporate income tax or personal income tax.
It’s also possible that your business will have to pay a different tax, known commonly as a franchise or privilege tax.
In Delaware, your LLC will be paying a franchise tax, a corporate income tax, and additional LLC and partnership taxes. Additionally, if you plan on someday turning your LLC into a Corporation or S Corporation, a franchise tax will also be required.
If you need help with your business taxes, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.