Tax obligations

Companies formed in Delaware are subject to yearly tax obligations, including:

  • U.S. Corporate Income Tax
  • Delaware Franchise Tax (for C Corporations) or annual LLC tax (for Limited Liability Companies)
  • A similar annual tax if your Delaware company also operates in other U.S. state(s)

Stripe’s partners can assist you in meeting tax requirements for states outside Delaware.

Make sure to watch the calendar, and plan ahead to meet any tax deadlines that apply to your business.

Key tax season dates

Plan ahead to meet any tax deadlines that apply to your business. For companies active in 2019, these include:

C Corporations

LLCs

Also, if your U.S. company has employees, or makes payments to U.S. vendors, it might be required to file a U.S. W-2 or 1099 form by January 31st, 2020.

When to form your company

C Corporations active in Delaware any time before December 31st owe at least the minimum Delaware Franchise Tax for that year. LLCs active before December 31st owe the full annual LLC tax for that year.

Neither the Franchise Tax nor the LLC tax is prorated. Your company might also owe U.S. Corporate Income Tax for the outgoing year. It might also owe taxes to a U.S. state other than Delaware, depending on where the LLC operates.

For all these reasons, companies planning to form near the end of a year might want to consider instead forming in January of the following year.

Filing U.S. Corporate Income Tax

Before working with an accountant and filing taxes, 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 might want to view our guide to surviving tax season.

The information to prepare depends on whether you are forming a C Corporation or a Limited Liability Company (LLC).

Be sure to have the following information for your corporation (as of the last day of the fiscal year for which you’re filing):

  • General information about your business. This includes your EIN.
  • 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 section in the questionnaire to indicate this.
  • Company ownership. Your corporation might have shares held by individual shareholders or business entities. 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 might have additional tax and reporting requirements. Provide this information in the questionnaire so that your accountant can help you file additional forms if needed. Some of the taxes you might 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 might apply to your business.

U.S. Corporate Income Tax Partners

Each U.S. business is required to pay corporate income taxes. We have partnered with tax advisors that specialize in working with startups to provide you affordable options for filing your corporate income taxes. These services are used by top startups and offer discounts for Stripe Atlas users. Each service specializes in a different area, so please choose the one that’s right for your company:

  • GBS Tax & Bookkeeping (formerly Greenback, $250 to $600)
    • Recommended for companies with no business or minimal activity up to $500k in revenue (companies with no activity still need to file a tax return)
    • 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
    • You can also complete an end of year financial clean up for $300
  • Early Growth ($1,150)
    • Early Growth has represented thousands of early stage startups in over 40 countries
    • Recommended companies with any level of business activity (no limit on annual revenue)
    • The package includes a federal tax return (Form 1120), one state tax return, and a free 30-minute consultation with an accountant
    • Additional state returns cost $250 and bookkeeping help costs $90 per hour

Once you sign up with one of our partners online, they will contact you via email. They’ll answer any final questions, prepare your tax return, and then share it with you to review and sign.

Be sure to have the following information for your LLC (as of the last day of the fiscal year for which you’re filing):

  • General information about your business. This includes your EIN.
  • The company’s financials. You can learn about year-end financial reports in our guide to surviving tax season.
  • Company ownership. Your LLC might have multiple owners (“members”); 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 might have additional tax and reporting requirements. Some of the taxes you might want to ask your accountant 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

Accounting options

Each U.S. business is required to pay income taxes. LLC companies can work with their own accountant to file their federal taxes. We have partnered with tax advisors that specialize in working with startups to provide you affordable options for filing your company’s income taxes. These services are used by top startups and offer discounts for Stripe Atlas users. Each service specializes in a different area, so please choose the one that’s right for your company:

  • GBS Tax & Bookkeeping (formerly Greenback, $250 to $600)
    • Recommended for companies with no business or minimal activity up to $500k in revenue (companies with no activity still need to file a tax return)
    • The package includes a federal tax return (Form 1065) and one state tax return
    • Additional state returns cost $70 and bookkeeping help costs $60 per hour
    • You can also complete an end of year financial clean up for $300
  • Early Growth ($2,400)
    • Early Growth has represented thousands of early stage startups in over 40 countries
    • Recommended companies with any level of business activity (no limit on annual revenue)
    • The package includes a federal tax return (Form 1065), one state tax return, and a free 30-minute consultation with an accountant
    • Additional state returns cost $250 and bookkeeping help costs $90 per hour

The Stripe Atlas Guide to Business Taxes has more information about tax types that might apply to your business.

Filing taxes in Delaware

Your company’s tax and reporting obligations in Delaware depend on whether you are forming a C Corporation or a Limited Liability Company (LLC).

All Delaware C Corporations are required to pay the Delaware Franchise Tax and to file an Annual Report. Even companies with no revenue in the previous fiscal year should expect to pay some amount.

Delaware Franchise Tax

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.

Notice of tax due

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 $200 late fee and interest of 1.5% per month on the tax amount originally due.

How to pay Delaware Franchise Tax

  1. Login to the state of Delaware’s website with your seven digit Delaware Business Entity File Number - You can easily find your company’s file number in two ways:
    1. Use Delaware’s entity search tool with your company’s legal name
    2. Find the State of Delaware stamp on page 2 of your “Filed Certification of Incorporation,” accessible in your Stripe Atlas dashboard
  2. Click on the “File Annual Report” link next to the year 2019
  3. Enter your company information: - Complete the “Stock Information” section to adjust your taxes owed shown in the upper right corner: enter the number of shares your company has issued, your Gross Assets (your “Total Assets” on your corporate income tax return), and your Asset Date (the same as your end of fiscal year). Then click the “Recalculate Tax” button (can take some time to reload) - Complete all of the remaining required fields indicated with a red star - If you haven’t adjusted your list of officers or directors since you incorporated, you can find these individuals in your “Board Approval” document, accessible in your Stripe Atlas dashboard
  4. Once all required information is complete, press the green “Continue Filing” button to review your information for accuracy
  5. Once you verify you entered all of the correct information, press the green “Proceed to Payment” button. - You can choose to pay your Delaware Franchise Tax and Annual Report filing fee either by credit card or ACH. After inputting your payment information, push the green “Submit” button to finalize your Delaware state taxes

You can save your work and return to it later, just make sure to save your session number, which the Delaware portal gives you the option of sending to an email address for easier access.

Delaware LLCs pay an annual LLC tax, sometimes referred to as the Business Entity Tax.

Annual LLC tax

All LLCs formed or registered in Delaware must pay an annual LLC tax, currently at a flat rate of $300. There is no requirement to file an Annual Report.

If the annual LLC tax is not submitted by June 1st, there is a $200 penalty and interest of 1.5% per month on the tax amount (and penalty) originally due.

How to pay the annual Delaware LLC tax

  1. Login to the state of Delaware’s website with your seven digit Delaware Business Entity File Number - You can easily find your company’s file number in two ways:
    1. Use Delaware’s entity search tool with your company’s legal name
    2. Find the State of Delaware stamp on page 2 of your “Filed Certification of Incorporation,” accessible in your Stripe Atlas dashboard
  2. Click the green “pay taxes” button - you should see a flat $300 fee for LLC - You can choose to pay your Delaware LLC tax fee either by credit card or ACH. After inputting your payment information, push the green “Submit” button to finalize your Delaware state taxes

You can save your work and return to it later, just make sure to save your session number, which the Delaware portal gives you the option of sending to an email address for easier access.

State taxes beyond Delaware

If your C Corporation or LLC operates in any states other than Delaware, it might be subject to annual taxation, registration, and reporting requirements in the other states. Stripe recommends that you consult legal and tax professionals about what requirements apply to your business. If you don’t have an attorney or tax advisor, Stripe Atlas can connect you with one of our partners.

Taxes before dissolving your company

If you aren’t operating your company anymore, you might still be obligated to file taxes every year until you dissolve it. When you dissolve a company, there might be additional tax filings and obligations for the year in which you dissolve the company. Work with an accountant to calculate the taxes you owe.

C Corporations can be dissolved in the state of Delaware only after they pay Delaware Franchise Tax and file their Annual Report. LLCs can be dissolved only after they pay annual LLC tax (no Annual Report is required).

Next steps

Now that you know more about tax obligations, you might want to read:

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