Companies incorporated days before the end of a calendar year owe at least the minimum Delaware Franchise Tax for that year, and may owe Corporate Income Tax as well. Companies planning to incorporate near the end of a year may want to consider incorporating in January of the following year.
Filing U.S. Corporate Income Tax
Before filing and working with an accountant, you should prepare as much of your company’s year-end financial data as possible. This is part of your bookkeeping responsibilities. There are several tools like Xero and Bench that can help with this, and you may want to view our guide for surviving tax season.
Once your company’s year-end financial data is ready, log in to your Stripe Dashboard and fill out the U.S. Corporate Income Tax questionnaire. This provides your accountant the information they need to help prepare your taxes. After completing the questionnaire, you can select an accounting service to help with the filing process. These services are used by top startups, and offer discounts of up to 50% for Stripe Atlas users.
Make sure to have the following information for your corporation (as of the last day of the fiscal year you’re filing for):
- General information about your business, this includes your EIN. Some fields may be populated already, so confirm the information is correct and current.
- The company’s financials, you can upload your balance sheet, income statement, and general ledger into the questionnaire to share them with your accountant. If some financial information isn’t ready yet, upload what you have and your accountant can help with the rest. You can learn about year-end financial reports in our guide on surviving tax season. If you don’t have any revenue or expenses for the past fiscal year, there’s a selection in the questionnaire to indicate this.
- Company ownership, you may have individual shareholders or business entities that are shareholders of your company. Make sure the information reflects the current ownership.
- Additional information, if your company employs people, owns property, operates locally in the U.S., or operates abroad, you may have additional tax and reporting requirements. Use this field to provide this information so your accountant can help you file additional forms if needed. Some of the taxes you may want to ask about include:
- Transfer pricing, if you’re based outside the U.S.
- State taxes, if you have business activity in any U.S. state
- Sales taxes
- Employment taxes
The Stripe Atlas Guide to Business taxes has more information about tax types that may apply to your business.
Once you fill out the questionnaire and review the information, you can select an accounting service. The options available to you depend on your business activity. Each service specializes in a different area, so choose the one that’s right for your company:
- Greenback Business Services ($250), for companies with minimal or no business activity (companies with no activity still need to file tax returns). The package includes a federal tax return (Form 1120) and one state tax return. Additional state returns cost $70 and bookkeeping help costs $60 per hour.
- Early Growth ($900 to $1,150), for companies with active businesses. Early Growth specializes in supporting startups and can chat with you over the phone to talk through your situation. The package includes a federal tax return (Form 1120), one state tax return, and a free consultation with an accountant. Additional state returns cost $250 and bookkeeping help costs $90 per hour.
- PwC ($3,000 starting price), for complex business situations. PwC is one of the world’s leading global accounting firms. They excel at navigating complex situations for fast-growing, international businesses.
Once you select your accountant, they will reach out to you over email. They’ll answer any final questions, prepare your tax return, and then share it with you to review and sign.
Filing Delaware Franchise Tax
Paying the Delaware Franchise Tax and filing an Annual Report is a requirement for all Delaware C Corporations. Even companies with no revenue in the previous fiscal year should expect to pay some amount. There are two methods for calculating the Delaware Franchise Tax: the Authorized Shares Method and the Assumed Par Value Capital Method. The state of Delaware allows companies to use the method that results in the lesser tax amount. You can read about these methods on Delaware’s site. It’s up to you to decide which method is best for your company.
The state of Delaware sends notices to companies that have not paid their Franchise Tax and filed their Annual Report, including a proposed bill for the tax payment (an “estimated tax notice”). Delaware uses the Authorized Shares Method to calculate the estimated tax. This method systematically results in a high tax bill for most Stripe Atlas users, though the state of Delaware allows companies to use the method that results in the lesser tax. If the Franchise Tax is not submitted by March 1st, there is a $150 late fee and interest of 1.5% per month on the tax amount originally due.
You can file and pay your company’s Delaware Franchise Tax using Stripe Atlas. The tool helps you calculate the amount owed using the method that leads to the lesser amount. When you’re ready, log in to your Stripe Dashboard. Make sure to have the following information for your corporation (as of the last day of the fiscal year you’re filing for):
- Number of authorized shares, the total number of shares authorized in your company’s Certificate of Incorporation, or the updated value if you changed the number of authorized shares since incorporation.
- Par value of shares, price per share listed in your company’s Certificate of Incorporation, or the updated value if you changed the par value of your shares since incorporation.
- Number of issued shares: the total number of shares issued to shareholders. You can enter 0 if you haven’t issued shares yet.
- Total gross assets, total amount of assets that the company owns (e.g., cash, inventory, equipment, investments, land, buildings). This number cannot be an estimate. You can use the value from the total assets you reported for your corporate income taxes.
After providing the above information and selecting a payment method, your Delaware Franchise Tax and Annual Report are submitted. Filing usually completes within two business days, and Stripe emails you when they’re filed. You can also check the status of your Delaware Franchise Tax and Annual Report on Delaware’s site. You can find your six-digit file number on your Certificate of Incorporation.
Taxes before dissolving your company
If you aren’t operating your company anymore, you may still be obligated to file taxes every year until you dissolve it. When you dissolve a company, there may be additional tax filings and obligations for the year you dissolve the company in. Work with an accountant to calculate the taxes you owe.
Companies can only be dissolved in the state of Delaware after they pay Delaware Franchise Taxes and file their Annual Report. You can use the Stripe Dashboard to pay and file your Delaware Franchise Tax and Annual Report. If you have questions about the tax filing process, please reach out to us at firstname.lastname@example.org. Stripe can’t provide tax or legal advice, but we can help you navigate the process using the Stripe Dashboard.
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