Delaware S Corp Instructions: Everything You Need to Know
Delaware S corp instructions are fairly simple but you will need to form your Delaware corporation first.3 min read
2. S Corp Eligibility and Election
3. Delaware Tax Extensions
Delaware S corp instructions are fairly simple. First, you will need to form your Delaware corporation. Second, you must make an S corp tax election with the Internal Revenue Service (IRS) after making sure that your company meets the correct qualifications.
Forming a Delaware Corporation
Forming a corporation provides numerous benefits, including limiting your personal liability for your business's debts. Unfortunately, incorporating also has drawbacks, including double taxation. If your business meets certain qualifications, however, you can elect S corporation tax treatment, which allows you to avoid corporate level taxation by distributing company profits directly to shareholders. If you're interested in S corp tax status, you will first need to complete state-level incorporation.
Choosing the right registration form is the first step of incorporating in Delaware. The form that you choose will depend on whether your company plans to issue stock. Regardless of which form you use, there are a few crucial pieces of information that you will need to include:
- The legal name of your Delaware corporation.
- Names and addresses of all incorporators.
- The purpose of your Delaware incorporations.
If stock will not be issued by your corporation, you will also need to list membership conditions. You can either state these conditions in your Certificate of Incorporation, or you can draft a shareholder agreement that prevents transferring shares so that you won't put your future S corp status at risk.
You will also need to submit a filing memo with the Delaware Division of Corporations. This form will include information such as your address, name, and phone number so that the Division can contact you when necessary. On this filing memo, you can also indicate if you would like expedited filing.
After you have completed your Certificate of Incorporation and filing memo, you should file both of these documents with the Division of Corporations.
S Corp Eligibility and Election
While forming your Delaware corporation, you should make sure that you meet the requirements for S corporation eligibility. First, your business cannot have more than 100 corporate shareholders. Second, your shareholders can only be members of the following groups:
- United States citizens and residents
- Certain trusts and estates
- Nonprofit organizations
If one of your shareholders falls outside of these eligible categories, you cannot elect S corp tax status. Even single-member corporations can choose S corporation taxation if the sole owner is a U.S. resident or citizen. Once you're sure that your company is eligible, you can file Form 2553 to make the S corporation election. Before filing this form, make sure you've included your corporation's name and whether you will use the calendar or fiscal tax year.
Every shareholder in your company must agree to the S corp election. To prove that the decision was unanimous, you must include information about every shareholder on Form 2553, including:
- Shareholders' names.
- Shareholders' Social Security numbers.
- Every shareholder's ownership percentage.
- Signatures from all shareholders.
Delaware Tax Extensions
When running your corporation, you must pay your taxes on time. In Delaware, you must submit corporate tax returns by the first day of the fourth month after your tax year has ended. For instance, if your corporation uses the calendar tax year, you should file your income return by April 1. You can request an extension if you won't be able to meet this deadline. If your extension gets approved, you will have an extra six months to complete and file your taxes. On the calendar year, this means your return is due October 1.
An extension does not give you extra time to pay your taxes, it only extends the filing date. You must pay your taxes by the original deadline. So, while your return would be due October 1, your payment is still due April 1. If you don't make your payment on time, you will be subject to penalties, and the State of Delaware may also charge you interest.
If you need a filing extension for your tax return, you should submit a Corporation Income Tax Request for Extension (Form 1100-EXT). If you want to pay your taxes at the same time you request your extension, file a Corporate Request for Extension Voucher (Form 1100T-EXT). If you have already received a federal tax extension of six months, you are already entitled to the Delaware six-month extension. You do not need to file either Delaware extension form in this case.
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