Delaware LLCs must pay an annual tax of $300 due on June 1. LLC members pay state income taxes, and if the LLC is taxed as a C-Corp, it may deduct expenses to lower taxes. Delaware offers liability protection and tax benefits for properly established LLCs.
Annual Franchise Tax and Annual Tax Rate
The Delaware Annual Franchise Tax of $300 is viewed as a “privilege fee” for access to Delaware’s business advantages, including its courts. Gross receipts tax rates vary based on business type, and LLC members are taxed on profits as pass-through entities. Self-employment taxes apply to business income of owners.
Initial Fees and Tax Rates for New LLCs
The initial Delaware LLC tax includes a filing fee of $90 and a $300 annual franchise tax. Additional costs for expedited services and obtaining certified copies of filing documents can apply. Delaware LLCs typically enjoy lower tax rates than corporations, and the state does not require the filing of annual reports.
Delaware offers refuge from certain taxes, with no sales tax and the absence of state corporate income tax for companies operating outside its borders. The state also does not tax investment income for holding companies and exempts offshore companies from state corporate income tax if owned by non-residents without US-sourced income. Delaware’s reputation and tax policies make it an attractive location for incorporation, attracting businesses with its advantageous tax structure. Critics label Delaware as a tax haven, while supporters argue it represents an ideal environment for businesses.