Welcome to the new year! It is a time for new beginnings and for your business to plan and execute on goals for the future. It is also the time to deal with your tax obligations, so that you can quickly refocus your attention on higher-priority goals.
In general, companies that were open at any point during the previous calendar year probably have tax filing obligations for that year. Stripe Atlas has built tools to help founders navigate these obligations. We know that taxes are stressful and something that most entrepreneurs do not consider themselves experts on, so to save entrepreneurs anxiety (and eliminate a major reason why people don’t go into business in the first place), we have set out to make the process better. We wrote a guide to US business taxes. Companies that incorporated with us can connect to an accountant for advice about their corporate income tax and pay their Delaware franchise tax.
Your tax season is likely to include the following steps, in order:
- Gather data about your business.
- Consult with your accountant, on the basis of the data.
- Review the return(s) prepared by your accountant.
- Submit the return(s) and pay any required tax.
Tax filings you need to make
Delaware corporations generally need to file returns for:
- US federal income tax
- The Delaware state franchise tax for corporations or annual fee for LLCs
Depending on circumstances, some companies may have state income tax filing obligations. Founders of US companies may personally have federal or state income tax obligations or tax obligations outside the US, especially if they lived or worked outside of the US.
If you incorporated your company using Stripe Atlas, we will be happy to introduce you to experienced startup accountants to help advise with regards to your US federal income tax return and other US tax obligations. If you lived or worked outside the US, you should also engage a local accountant regarding the tax issues in your other jurisdiction(s).
Before you speak to an accountant
Accountants are, effectively, the engineers of money. Just like engineers don’t spend most of their time typing in data, accountants generally do not personally do the underlying recordkeeping and math that supports tax returns. This is generally done by bookkeepers or by entrepreneurs using bookkeeping software. (More on the difference between these two functions here.) Generally, your accountants will not be able to start filing your taxes until your books are prepared and your financial statements are finalized.
Your accountants will want your financial statements, specifically your:
- General ledger: a list of all transactions for the corporation
- Balance sheet: a summary of what the company owns and owes
- Income statement: a calculation of profit (or loss)
Your general ledger (sometimes described colloquially, with supporting documentations, as your “books”) is a list of transactions your business has made. Your ledger will be prepared by your bookkeeper on the basis of primary evidence such as receipts, invoices, credit card statements, and the like. Each transaction will generally be associated with a day, an amount, the two accounts involved in the transaction, a category, and a brief description of what the transaction was. Businesses may have only a few dozen ledger entries per month or millions, depending on the level of activity in the business and choices they make regarding recordkeeping granularity.
The balance sheet and income statement are summary documents prepared, generally by software, on the basis of your ledger.
A balance sheet lists your assets and liabilities at the start and end of the tax year. It will look something like this:
|Bene||A inizio anno||A fine anno|
|Contanti||500 USD||500 USD|
|Conto corrente||18.000 USD||37.000 USD|
|Totale beni||27.000 USD||45.000 USD|
|Passività||A inizio anno||A fine anno|
|Conti passivi||3.600 USD||2.300 USD|
|Rendita||12.000 USD||24.000 USD|
|Totale passività||20.000 USD||35.000 USD|
|Patrimonio netto||7.000 USD||10.000 USD|
You will get your balance sheet from the bookkeeping software that you (or your bookkeeper) uses. Your accountant will use it extensively in preparing your corporate income tax return(s), and additionally, your total assets will be used to calculate your Delaware franchise taxes.
A fun fact about balance sheets: A company’s shareholder equity will always be the difference between its total assets and its total liabilities. (This is interesting as an accounting matter, but in startups, the value of a company on its balance sheet generally bears no relationship to how it is valued by investors.)
Your income statement (also known as the profit and loss statement or P&L) simply sums your revenue, expenses, and income (revenue minus expenses) for the year, broken down into coarse categories. It will look something like this:
|Abbonamenti SaaS||75.000 USD|
|Totale ricavi||75.000 USD|
|Tipo di spesa||Importo|
|Totale spesa||40.000 USD|
|Utile netto||35.000 USD|
You will also get your company’s income statement from your bookkeeping software.
Federal corporate income tax
The first step in working with your accountants to prepare your federal corporate income tax return will be providing them with data, including your financial statements. This will help them drill into ambiguities or places where they need additional information, advise you on the correct tax positions to take, and ultimately prepare your return correctly.
Stripe Atlas can recommend an accounting firm appropriate for your business from among our handpicked providers. If you work with other accountants, they will advise you what information they need and what format they expect to get it in.
You should expect to be asked about:
- Who owns the company and by what percentages
- Where the company has physical operations
- The main lines of business the company operates
- Whether the corporation has depreciating assets
The cost of preparing your taxes will depend on a variety of factors, including whether your financial statements are complete, whether your records are well-organized, what level of complexity your business is exposed to, and the degree to which special circumstances expose you to additional reporting requirements.
Stripe Atlas has negotiated a range of packages appropriate to your business’s circumstances. We can get a better price for better services because we can negotiate volume pricing with our partners and allow our partners to specialize in only the parts of tax compliance that are relevant to most internet companies.
Filing and payment for your corporate taxes are due on April 15 of each year. If you have an LLC that is treated as a partnership for tax purposes, your filing and payment are due on March 15.
Delaware franchise tax and annual report filing
Stripe Atlas can assist corporations with filing and paying your franchise tax and annual report filing fee.
You will need four pieces of information:
- Number of authorized shares
- Number of shares issued
- Par value of shares
- Gross assets of the company
The gross assets that Delaware requires you use for this calculation are listed on Schedule L of your form 1120, and they’re sourced off of your company’s balance sheet.
Your initial number of authorized shares and par value of shares were set at incorporation. If you haven’t done anything to change these, Stripe Atlas can remind you of what they were.
You need to check your records or speak with your professional advisors to see how many shares have been issued. If you used the Stripe Atlas tool to issue your founder stock, we can help you find how many shares you signed documents to issue to the founders. (As a reminder, founders must purchase their shares to finalize the issuance.)
Companies incorporated using Stripe Atlas will generally owe the minimum tax, which is presently $450 ($400 for franchise taxes using the Assumed Par Value method, and $50 for the annual report filing fee) per year.
Your franchise tax filing and annual report, and the payment for them, are due by March 1 of each year.
LLCs formed using Stripe Atlas will generally pay an annual Delaware LLC tax of $300, which is due on June 1 of each year. We will connect you with one of our partners if you need assistance with paying your LLC tax.
We are not accountants, and we can’t give tax advice, but we’re happy to introduce Stripe Atlas companies to qualified accountants. Drop us a line at firstname.lastname@example.org or ask your question on our forums.
We have also written extensively about business taxes for internet companies.
Disclaimer: This guide is not intended to and does not constitute legal or tax advice, recommendations, mediation, or counseling under any circumstance. This guide and your use thereof do not create an attorney-client relationship with Stripe, Orrick, or PwC. The guide solely represents the thoughts of the author and is neither endorsed by nor does it necessarily reflect Orrick’s belief. Orrick does not warrant or guarantee the accurateness, completeness, adequacy, or currency of the information in the guide. You should seek the advice of a competent attorney or accountant licensed to practice in your jurisdiction for advice on your particular problem.