Running a Business in Delaware? Here's What You Need to Know

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Federal Tax for Foreign Owned Businesses

Foreign-owned LLCs are taxed at a rate of 30% on their US-sourced income, while foreign-owned C-Corps are subject to a 21% tax rate on their global taxable income. For information on the federal tax forms foreign-owned US businesses must file, read our guide.

Delaware State Income Tax

Non-Delaware residents don’t need to pay personal income tax, and stock owned by non-residents won’t be taxed, either. Thus, businesses operating outside of Delaware don’t have to pay state corporate income tax.

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If your business operates in Delaware (or has Delaware-sourced income):

• C-Corps: required to file a corporate income tax return (Form 1100 or 1100EZ) and pay a tax of 8.7% on its federal taxable income allocated and apportioned to Delaware. You can refer to this resource to learn more.
• S-Corps: required to file a corporate income tax return 1100S, and will be subject to your personal income tax bracket.
• Partnerships: required to file partnerships return Form 300, and will be subjected to your personal income tax bracket.
• Sole-proprietorship: residents are required to pay income taxes and must file Form 200-01 annually. The personal income tax brackets range from 2.2 percent to 6.6 percent at their highest.

Delaware Annual Report

• What is it: Annual reports are entity information updates due to the secretary of state each year. All Delaware-incorporated businesses are required to file.
• Due date: If your business is a corporation, you must file by March 1st and pay $50 filling fee. All Delaware LLC, LP, and GP are not required to file an annual report. However, the entities are required to pay an annual flat rate of $300 by June 1.
• How to file: You must file your annual report electronically on the state’s online filing system. You will need your 7-digit Business Entity File Number at the time of filling. You can look yours up here.
• Penalty: Failure to file the report and pay the required franchise taxes will result in a penalty of $200.00 plus 1.5% interest per month on tax and penalty.

Delaware Franchise Tax

• What is it: A franchise tax, sometimes called a privilege tax, is a fee you pay for the privilege of doing business in a certain state. All Delaware-incorporated businesses must pay the annual franchise tax.
• Due date: If your business is a corporation, you must pay by March 1st. All LLCs, LPs, and GPs formed in Delaware are not required to pay separate Franchise taxes.
• How to file: You must pay franchise tax and file your annual report electronically on the state’s online filing system. You will need your 7-digit Business Entity File Number at the time of filling. You can look yours up here.
• How to calculate your franchise tax: Depends on which method you use to calculate your Delaware franchise tax: the Authorized Shares or Assumed Par Value Capital method. You can use whichever amounts to the least tax owed. Alternatively, you can also use the spreadsheet-based calculator that the state provides.
• Penalty: Failure to file the report and pay the required franchise taxes will result in a penalty of $200.00 plus 1.5% interest per month on tax and penalty.

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Further reading: How to Calculate and Pay Delaware Franchise Tax