Compliances for Corporations in Delaware, USA
1. Registered Agent
A Registered Agent acts as the liaison between the company and the state in which it is incorporated. Registered Agents are responsible for receiving and forwarding service of process and correspondence such as franchise tax notices, from the state in which they’re registered to the client.
The Delaware Code states that “every Corporation shall have and maintain in Delaware a Registered Agent,” per section 132(a) of the Delaware General Corporation Law and section 18-104 of the Delaware LLC Act.
2. Payment of Franchise Tax and Annual Report
All corporations incorporated in the State of Delaware are required to file an Annual Report and to pay a franchise tax. Exempt Domestic Corporations do not pay a tax but must file an Annual Report.
- Due Date – 1St March every year
- Amount –
- Annual Report fee for exempt domestic Corporation – $ 25.
- Annual Report fee for non-exempt domestic Corporations – $ 50.
- The minimum tax for Corporations using the Authorized Shares method – $ 175.
- The minimum tax for Corporations using the Assumed Par Value Capital Method -$ 400
Taxpayers owing $5,000.00 or more pay estimated taxes in quarterly instalments with 40% due June 1, 20% due by September 1, 20% due by December 1, and the remainder due March 1.
The penalty for not filing a completed Annual Report on or before March 1st is $200 + Interest at 1.5% per month is applied to any unpaid tax balance.
3. Business License
Corporations conducting a trade or business in the State of Delaware, including Corporations in Delaware who conduct their business outside the state, are required to obtain a Delaware business license from the Delaware Division of Revenue.
Generally, most Delaware business licenses are good for one year and expire each December 31st. After the first year of being licensed in Delaware, Corporations may opt, but is not required, to obtain a three-year Delaware business license.
Business License for the forthcoming year are required to be renewed no later than December 31st of the preceding year.
4. Internal Compliance
- A copy of the Certificate (Articles) of Incorporation
- By Laws
- Initial and subsequent minutes of directors and shareholder meetings
- Stock registers
1. Delaware’s Corporate Income Tax
Every domestic or foreign corporation doing business in Delaware, not specifically exempt under Section 1902, is required to file a corporate income tax return and pay a tax on its federal taxable income allocated and apportioned to Delaware.
- Tax rate – 7 % on its federal taxable income allocated and apportioned to Delaware
- Forms used – Form 1100 or Form 1100EZ
- Due Dates –
- Calendar year taxpayer, on or before April 15 of the following year
- In the case of a fiscal year taxpayer, the return is due on or before the fifteenth day of the fourth month following the close of the fiscal year
Please note a federal extension automatically extends the Delaware due date.
Corporate income tax returns filed late are subject to a penalty of 5% per month, plus interest of 0.5% per month from the original due date until paid. In addition to the above penalties and interest, an additional penalty of 1% per month (not to exceed 25%) is imposed for failure to pay (in whole or in part) the tax liability shown to be due on a timely filed return. (30 Del.C., Sec. 533 & 534).
Delaware requires every corporation filing a Delaware corporate income tax return to attach a completed copy of a pro forma federal tax return, including all schedules and attachments.
2. Withholding Tax Compliances
- All employers are required to supply each employee a withholding statement on Form W-2, showing total wages and amount of Delaware income tax withheld. This statement must be provided to the employee on or before January 31 of each year reporting the wages paid during the preceding year, or if the end of employment is prior to that date, not later than 30 days after the last payment of wages.
- Every employer required to deduct and withhold taxes on a monthly basis for each calendar month on or before the 15thof the month following the end of such calendar month, file Form W-1 withholding return, and pay to the Division of Revenue the taxes so required to be deducted and withheld.
- Every employer required to deduct and withhold taxes on a quarterly basis shall for each quarter on or before the last day of the month following the end of such calendar quarter, file Form W-1Q withholding return, and pay to the Division of Revenue, or to a designated depository, the taxes so required to be deducted and withheld.
- Every employer must file a Reconciliation of Income Tax Withheld for each year. All employers are required to submit an Annual Reconciliation/Transmittal of Income Tax Withheld by filing Form W-3 along with a duplicate copy of Federal Form W-2 indicating the amount of Delaware tax withheld from each employee. Form W-3 is due on or before February 28thof each year reporting withholding amounts for the preceding calendar year.
3. Gross Receipts Tax
Delaware’s Gross Receipts Tax is a tax on the total gross revenues of a business, regardless of their source. This tax is levied on the seller of goods or services, rather than on the consumer. Gross receipts tax rates currently range from 0.0945% to 0.7468%, depending on the business activity.
There are no deductions for the cost of goods or property sold, material or labour costs, interest expense, discounts paid, delivery costs, state or federal taxes, or any other expenses allowed.
Delaware Gross Receipts tax returns and payments are due either monthly or quarterly, depending on a business’ total gross receipts. The Division of Revenue uses a “look-back period” to determine whether a business is a monthly or quarterly filer.
If you are set-up as a monthly filer, then your gross receipts tax is due on or before the 20th day of each month with respect to the aggregate gross receipts for the immediately preceding month.
If you are set-up as a quarterly filer, then your gross receipts tax is due on or before the last day of the first month following the close of the quarter.
Please note that all new businesses are automatically set-up as quarterly gross receipts tax filers.
4. Annual Tax Return
Corporations based in the United States “must file an income tax return whether or not they have taxable income” to the IRS. The same rule applies to limited liability companies that have elected to be taxed like Corporations.
Due Date – 15Th day of the 4Th month after the end of the tax year.
Forms used – 1120