Introduction
Delaware and Wyoming are two of the most business-friendly states in the U.S., offering tax advantages, strong legal protections, and privacy benefits. However, choosing between the two depends on factors like franchise tax, corporate income tax, and business structure flexibility.
This guide compares Delaware vs. Wyoming business tax benefits, helping entrepreneurs decide the best state for incorporation.
Delaware vs. Wyoming: Business Tax Comparison
| Tax Type | Delaware | Wyoming |
|---|---|---|
| Corporate Income Tax | 8.7% (Only for businesses operating in Delaware) | None |
| Franchise Tax | $300 (LLCs), $175+ (Corporations) | None |
| Personal Income Tax | Yes (2.2% – 6.6%) | None |
| Sales Tax | None | None |
| Annual Reporting | Required for Corporations | Minimal Reporting |
| Business Privacy Protections | Strong | Stronger |
1. Corporate Income Tax: Wyoming Wins
- Delaware:
- Charges an 8.7% state corporate income tax, but only if the company operates in Delaware.
- Out-of-state businesses pay $0 corporate income tax.
- Wyoming:
- Has no state corporate income tax, making it more favorable for companies generating taxable profits.
Winner: Wyoming (because all corporations avoid corporate income tax).
2. Franchise Tax: Wyoming Wins
- Delaware:
- LLCs pay a flat $300 franchise tax annually.
- Corporations pay a minimum of $175, which increases based on authorized shares.
- Wyoming:
- No franchise tax for LLCs or Corporations.
Winner: Wyoming (because there’s no franchise tax).
3. Sales Tax: Tie
- Neither Delaware nor Wyoming charges a state sales tax.
Winner: Tie (both states offer tax-free business purchases).
4. Business Privacy Protections: Wyoming Wins
- Delaware:
- Owner names do not have to be listed publicly, but corporations must file annual reports with shareholder details.
- Wyoming:
- Offers even stronger privacy protections—business owners are not required to disclose their identities publicly.
Winner: Wyoming (for stronger privacy protections).
5. Business Court System: Delaware Wins
Delaware:
- Home to the Court of Chancery, a specialized court for business disputes.
- Quick resolution for corporate legal matters with experienced judges.
- Wyoming:
- Business legal disputes go through standard courts, which may take longer.
Winner: Delaware (for legal protections and a faster dispute resolution process).
6. Ease of Raising Capital: Delaware Wins
- Delaware:
- Preferred by venture capitalists and investors.
- 60% of Fortune 500 companies are incorporated in Delaware.
- Wyoming:
- Not as well recognized for raising capital.
Winner: Delaware (best for startups seeking investment).
Which State Is Best for Your Business?
| Business Type | Best State to Incorporate |
|---|---|
| Tech Startups & Companies Raising Capital | Delaware |
| Small Businesses & Freelancers | Wyoming |
| Real Estate Holding Companies | Wyoming |
| E-commerce Businesses | Wyoming |
| Businesses Needing Strong Legal Protections | Delaware |
Delaware & Wyoming Business Formation Costs
| Cost Type | Delaware LLC | Wyoming LLC |
|---|---|---|
| Formation Fee | $90 | $100 |
| Annual Franchise Tax | $300 | $0 |
| Annual Report Fee | $50 (corporations only) | $60 |
IRS Compliance & Business Tax Considerations
- Form 1120 (C-Corp) or 1120S (S-Corp) – Corporate tax return.
- Form 1040 (Schedule C) – For LLC owners reporting business income.
- Annual Franchise Tax Report – Required for Delaware corporations.
Conclusion
- Delaware is best for businesses looking to raise capital or benefit from strong corporate laws.
- Wyoming is best for small businesses, LLCs, and companies looking to reduce taxes and maximize privacy.
For expert tax planning and business structuring, schedule a meeting with our CPA Anshul Goyal by clicking at https://calendly.com/anshulcpa/ now.
Frequently Asked Questions (FAQs)
1. Which state has lower business taxes, Delaware or Wyoming?
Wyoming has no corporate income tax, no franchise tax, and no personal income tax, making it the lowest-tax option.
2. Which is better for startups, Delaware or Wyoming?
Delaware is preferred by venture capitalists and investors, making it the better choice for startups.
3. Do I have to live in Delaware or Wyoming to incorporate there?
No, you can incorporate in either state without being a resident.
4. Which state has better privacy protections for business owners?
Wyoming offers stronger privacy protections, as owner identities do not have to be disclosed publicly.
5. Should I hire a CPA before incorporating?
Yes, a CPA can help you choose the right state and business structure to minimize taxes and stay compliant.
About Our CPA
Anshul Goyal, CPA EA FCA is a licensed Certified Public Accountant and an IRS Enrolled Agent (EA). He specializes in business incorporation, tax planning, and compliance for U.S. and international businesses.
Schedule a consultation today with Anshul Goyal, CPA, for expert guidance on selecting the best state for your business.