Accounting and tax

Corporate taxes in Delaware

Tax rate in Delaware

  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 doing business in Delaware must include, in its Delaware taxable income, dividends received from a foreign corporation.

Other taxes in Delaware

  1. A corporation incorporated under the laws of Delaware is also subject to an annual corporate franchise tax;
  2. Delaware does not impose state withholding taxes on dividends or interest or royalties paid to overseas shareholders;
  3. Delaware does not tax imports or exports.

Accounting rules

  1. Delaware does not impose thin capitalisation rules, nor controlled foreign company rules, nor transfer pricing rules;
  2. Foreign entities are allowed to re-domicile to Delaware including tax haven companies;
  3. Delaware allow corporations to carry forward net operating losses for up to 20 years, but Delaware also allows them to carry back up to US$30,000 of such losses for up to two years.

Legal and compliance

Management

  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. 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.

Other considerations

  1. 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;
  2. 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;
  3. Transfers of companies both inwards and outwards of Delaware are permitted.

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: