Delaware accounting and tax considerations

Legal obligations for Delaware companiesSince 2003, Healy Consultants PLC helps our multi-national Clients timely and accurately and completely discharge their USA annual accounting and tax obligations. Some considerations include:

  1. A Delaware corporation (C-corp) suffers USA corporation tax. A Delaware LLC suffers USA personal income tax;
  2. Because a Delaware entity is incorporated in the USA, it is considered a USA tax resident vehicle. A Delaware entity is not a legally tax exempt corporate structure;
  3. At the rate of 8.7%, a Delaware entity suffers State income tax only on i) income from Delaware sources and ii) on income apportioned to Delaware;
  4. A corporation doing business in Delaware and having receipts from Delaware sources is subject to Delaware gross receipts tax at various rates depending on the nature of the business conducted in Delaware;
  5. A corporation incorporated under the laws of Delaware is also subject to an annual corporate franchise tax;
  6. Delaware does not impose state withholding taxes on dividends or interest or royalties paid to overseas shareholders;
  7. Delaware does not tax imports or exports;
  8. A corporation doing business in Delaware must include, in its Delaware taxable income, dividends received from a foreign corporation;
  9. Delaware does not impose thin capitalisation rules, nor controlled foreign company rules, nor transfer pricing rules;
  10. Foreign entities are allowed to re-domicile to Delaware including tax haven companies;
  11. Delaware allow corporations to carry forward net operating losses for up to 20 years, but Delaware also allows them to carry back up to $30,000 of such losses for up to two years.

Legal and Compliance considerations

  1. A Delaware LLC may be managed by i) a designated manager or ii) or by a corporate Board of Directors. This is known as a “Manager Managed LLC”;
  2. A Delaware LLC managed by the equity owners is known as a “Member Managed LLC”. No management team is put into place and no power is delegated to a Manager nor to the Board of Directors. The Members make all decisions per the provisions set forth in the LLC Agreement as agreed upon by the parties;
  3. Delaware law permits the formation of non-stock corporations, whether or not organized for profit;
  4. A company may dividend out any of its assets, including; profits, share premium and capital, as long as said company can pass a solvency test immediately after the dividend payment;
  5. A Delaware company may buy back or redeem its own shares as long as the said company can pass a solvency test, immediately after the distribution;
  6. The board of directors of a corporation shall consist of one or more members, each of whom shall be a natural person. The power to appoint and remove directors is governed by the provisions of a company’s Bylaws;
  7. The annual franchise tax which falls due on 1 March for Corporations and 1 June for an LLC. Depending on the amount of paid up share capital, the minimum annual franchise tax ranges from US$ 75 and US$ 18,000;
  8. Bearer shares are not permitted;
  9. Transfers of companies both inwards and outwards of Delaware are permitted;
  10. Depending on the amount of paid up share capital, the minimum annual franchise tax ranges from US$ 75 and US$ 18,000.

Contact us

For additional information on our accounting and tax services in Delaware, please email us at email@healyconsultants.com. Alternatively please contact our in-house country expert, Mr. Paavan Chhabra, directly:
client relationship officer - Paavan