Free Guide to Taxes in Delaware.
Delaware is actually one of the most expensive states for corporations in America. While it’s often thought of as a tax haven, the truth is that if you’re going to operate in Delaware, have a corporation formed in Delaware and have a lot of shares, or live in Delaware and work outside of the state, you’re going to pay through the teeth on taxes.
Delaware corporate taxes work out to 8.7% of your net income. Delaware corporate net income tax is only on a Delaware C corporation that has defaulted or opted for a C corporation election with the IRS.
Foreigners without social security numbers incorporating in Delaware have to file as C corporations with the IRS, which is what a Delaware corporation is defaulted to without any elections. The good news is that you won’t have nexus in the state unless you actually do business in Delaware.
You have to actually have nexus in Delaware to pay income tax. And better yet, the big law firm lobbyists have got statutes specifically covering people that utilize virtual offices and mail forwarding services in Delaware, even going as far as to say having a Delaware business license doesn’t constitute “Nexus”.
Why do corporations decide to pay really high corporate income tax in Delaware?
The only real reason is the courts. The courts in Delaware are business friendly and have tons of previous cases to support decisions. That may seem like a small detail, but for years, Florida has been the place to set up an LLC for protection of the LLCs assets from the owners problems. Thousands of thousands of Florida LLC holding companies have been formed for this, but on June 24, 2010, the Florida Supreme Court issued a decision in the Shaun Olmstead case, basically taking a chainsaw through the corporate veil, longtime thought to be the best in the country.
So while 8.7% may sound like a high Delaware corporate income tax, it could be cheap compared to losing your corporate veil, and thus many people incorporate in Delaware.
Forms can be found at the Delaware Department of Revenue below:
Delaware Department of Revenue
Carvel State Office Building
820 North French Street
Wilmington, DE 19801