Business Incorporation: Delaware Corporate Taxes
When it comes to incorporating a business, one need not be limited to the place of business. One can have a business in Texas yet be incorporated somewhere else. Thus, when it comes time to incorporate your own business, you need to think about your venue of business incorporation. Delaware will probably be your first choice of business incorporation venue in the U.S.
You must have already heard about the favorable conditions in Delaware. In fact, Delaware is a state that encourages not only incorporation but also other types of business entity formation; limited partnerships and statutory trusts, among others, can be formed and registered in Delaware. Indeed, Delaware is a state that is good to its registered businesses.
Before you finally submit your certificate of incorporation to the Delaware Division of Corporations, however, read on to know more about Delaware incorporated businesses' tax duties and obligations.
Corporate Franchise Tax A business corporation in Delaware is required to pay a franchise tax annually. The franchise tax is calculated based on the corporation's number of shares. For instance, a corporation with 3,000 shares or less pays the minimum franchise tax of $35. For corporations with more than 3,000 and up to 5,000 shares, the annual franchise tax is $62.50. For corporations with more than 5,000 and up to 10,000 shares, the annual franchise tax is $112.50. From then on, companies have to pay an additional $62.50 in annual franchise taxes for every 10,000 (or fraction of this number) additional shares. It is important to note that in Delaware, the annual franchise tax has to be paid when the annual report is filed. Annual report filing costs $25 for all corporations - even those which are exempt from franchise tax levy. State Corporate Taxes In Delaware, corporations are charged for the income that they earn within the state. The amount of taxes levied is 8.7% of the corporation's taxable income. However, businesses that have been incorporated in Delaware but do not perform its business activities in the state cannot be taxed for its income. Moreover, corporations whose main purpose is to manage and administer non-tangible investments such as bonds, stocks, notes, and other such investment instruments are also exempt from this type of tax. Delaware is one of the best tax havens for business entities. No value added taxes are levied; state sales taxes are not charged on the corporation's purchases within Delaware; real property taxes are not charged by the state. These and more tax benefits await the business corporations that choose to make Delaware its venue of incorporation.
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