FAQs Before Forming A Company In Delaware

Over the last 28 years we have noticed that clients who are exploring the process of a Delaware business filing have similar concerns, mostly relating to tax issues, compliance matters in another state or states, and annual Delaware maintenance costs. In this blog post, we’ll try to answer some of those questions.

Do I pay Delaware income tax if I incorporate in Delaware?

Delaware companies that do not do business in Delaware are not required to file Delaware State income taxes. Income tax is generally paid to the state or states of actual business operations and to the IRS. Delaware companies are required to pay Franchise Tax to the state of Delaware annually.

If I incorporate in Delaware what are the annual maintenance costs?

Two annual fees are required of every Delaware company: 1.) The State’s Franchise Tax, and 2.) The Registered Agent Fee. Delaware requires that each Corporation or LLC pay an annual Franchise tax and maintain a Registered Agent in the state for proper forwarding of service of process and official correspondence.

1. LLCs filed in DE will pay a fixed Franchise Tax of $250.00 by June 1, beginning the year after filing. CORPORATIONS are required to pay Franchise Tax by March 1, beginning the year after filing. The amount is based on the annual report offered by each corporation and is reflective of par value, issued shares and gross assets. A minimal stock corporation will generally pay $75.00 in tax and $25.00 for the report fee. Delaware offer’s some of the lowest Franchise Tax rates of any state.

2. Those who file in Delaware from another state or jurisdiction are required to maintain an agent in the state. The Registered Agent is responsible for maintaining a physical address in Delaware and forwarding any legal service of process or official Delaware correspondence. With Harvard Business Services, our agent fee is the lowest in the industry. ($50 per year) and we guarantee it will remain fixed at $50 per year for the life of your company.

What is needed to fulfill the compliance requirements in my home state to make my business operations legal and valid in my respective jurisdiction?

Typically, each state’s compliance issues differ. However, all 50 states will require the qualification of any “foreign business entity”. (The word “foreign” means formed or incorporated in another state, outside the state of actual business operations.)

Although the fees and requirements may vary from state to state; the typical requirements are to fulfill the registration process with that respective Secretary of State’s office and submit a fee and proper documentation of the original filing. This process should be fulfilled prior to business operations. Some states will require the “Certificate of Authority” in order to open a bank account or to obtain other licenses.