Registering a business in Delaware
Depending on your business structure, you may be required to register and file with several state agencies in Delaware. The Delaware Division of Corporations provides a registration walk through for new business owners, found here.
S-Corporation Income Tax
Delaware recognizes the federal S-election, and Delaware’s S corporations are not required to pay income tax to the state. However, individual S corporation shareholders will owe tax on their share of the corporation’s income.
S corporations are however subject to a flat annual tax of $300.
LLC/Partnership Income Tax
LLCs and partnerships are not required to pay income tax to Connecticut. Instead, income from the business is distributed to individual LLC members or partners, who then pay Colorado income tax on that amount with their personal return.
LLCs and partnerships are however subject to a flat annual tax of $300.
Corporate Franchise/Privilege Tax
Delaware franchise tax applies to C corporations and S corporations. Delaware provides two different methods for calculating the franchise tax: the authorized shares method and assumed par value capital method.
Authorized Shares Method - Your corporation pays a flat fee that varies depending on the number of authorized shares, as follows:
5,000 shares or less = $175 fee
5,001 to 10,000 shares = $250 fee; and
10,000 or more shares = $250 base fee + $85 additional fee for each additional 10,000 shares or fraction thereof.
Assumed Capital Value Method - Your corporation pays a flat fee that varies depending on its amount of assumed no-par capital along with a fee for assumed par value capital. The fees for amounts of assumed no-par capital are as follows:
$500,000 or less of assumed no-par capital= $175 fee
$500,001 to $1 million of assumed no-par capital= $250 fee; and
$1 million or more of assumed no-par capital = $250 base fee + $85 additional fee for each additional $1 million or fraction thereof.
Delaware LLCs and partnerships are required to pay an annual tax of $300.
Delaware allows composite returns to be filed for qualifying non-resident shareholders of an s corporation or of qualifying non-resident partners of a partnership if the following are met:
Individuals must be non-residents for the whole taxable year.
Individuals must have no income from sources within the state aside from their distributive share of income from the business.
All individuals included in the return must have the same tax year.
Delaware businesses that file composite returns do so on Form 200-C.
Individual Income Tax
Delaware generally conforms to the Internal Revenue Code on a rolling basis, and therefore adopts most federal provisions, unless otherwise modified.
The starting point for computing Delaware's personal income tax liability is the federal adjusted gross income.
Delaware allows a state defined standard deduction. Here are the standard deduction amounts.
Head of household: $3,250
Married filing jointly: $6,500
Married filing separately: $3,250
Married filing a combined separate return: $3,250
You are able to take an itemized deduction, which is state defined, even if you took the standard deduction on your federal return.
Personal exemptions are offered. For single filers and dependents, the amount is $110. For married filing joint filers, the amount is $220.
Delaware does not conform to the Internal Revenue Code (IRC) section 199A, also known as the QBI deduction.
Individual income tax rates vary between 2.2% and 6.6%. Taxpayers should check the individual income tax tables for the most up to date information and further information on how to compute tax due.
CARES Act Guidance
Rolling conformity states generally automatically adopt changes to the IRC as they are enacted at the federal level, unless otherwise modified.
Delaware pass through entity returns are due on the 15th day of the third month following the close of the tax year. For most businesses, the return will be due on March 15th.
Individual income tax returns are due on the 15th day of the fourth month following the close of the tax year. For most taxpayers, returns will be due on April 15th.
Every S Corporation deriving income from sources within Delaware must make estimated payments of personal income tax on behalf of its nonresident shareholders based on the non-residents’ share of the distributive income of the corporation. The S Corporation must make an estimate of its distributive income for the taxable year (apportioned to Delaware) and multiply it by the percentage of stock owned by the non-resident shareholders. This amount is then multiplied by 6.60% to determine the amount of personal income tax required to be paid by the S Corporation.
Individuals who can reasonably be expected to exceed $800 in tax due at the end of the tax year may be required to make estimated payments.
Filing an Extension
S corporations and partnerships that receive an automatic six month extension from the IRS will also be granted the same extension for filing their return. A copy of the extension must be attached to the final return when filed.
Individuals use Form 200ES to request an extension. If filed timely, the due date to file is extended to October 15th.
S corporations will be subject to a 5% per month up to 50% maximum of the the amount due for filing a late return.
Partnerships will be subject to a $25 per month penalty, up to a maximum of 5 months for filing a late return.
Individual income returns are subject to a 5% of the balance due for filing a late return.
If your business was formed or is located in another state, but generates income in Delaware, it may be subject to Delaware taxes. The rules for taxation of multistate businesses, including what constitutes nexus with a state for the purpose of various taxes, are complicated. If you run such a business, you should consult with a tax professional.
Delaware Division of Revenue:
Delaware Division of Corporations: