Introduction
Delaware is a business-friendly state known for its strong corporate laws, no sales tax, and tax flexibility for companies. However, all LLCs, corporations, and partnerships must comply with Delaware’s business tax requirements, including franchise taxes, gross receipts tax, and corporate income tax if they operate in the state.
This guide explains Delaware’s business tax obligations, deadlines, and how to avoid penalties.
What Business Taxes Apply in Delaware?
| Tax Type | Who Pays? | Tax Rate | Due Date |
|---|---|---|---|
| Franchise Tax | All LLCs, corporations, and LPs | $300 (LLCs), $175+ (corporations) | March 1 (corporations), June 1 (LLCs & LPs) |
| Corporate Income Tax | C-Corporations doing business in Delaware | 8.7% | April 15 |
| Gross Receipts Tax | Businesses selling goods/services in Delaware | 0.0945% – 0.7468% | Monthly or quarterly |
| Employer Payroll Taxes | Businesses with employees | Varies | Ongoing |
| Personal Income Tax | Pass-through entities (LLCs, S-Corps) | 0% – 6.6% | April 30 |
Franchise Tax: Who Pays and How Much?
All Delaware LLCs, corporations, and LPs must pay an annual franchise tax to keep their business in good standing.
Franchise Tax for LLCs & LPs
- Flat $300 per year (due June 1).
- No exemptions, even if the company has no revenue.
Franchise Tax for Corporations
- Minimum $175, but can be as high as $200,000, based on authorized shares.
- Due March 1 each year.
Late Payment Penalty: $200 plus 1.5% monthly interest.
Corporate Income Tax in Delaware
- Only applies to corporations with business operations in Delaware.
- Rate: 8.7% of net income.
- Due Date: April 15 each year.
Exemption: If a corporation is registered in Delaware but does not do business there, it does not pay Delaware corporate income tax.
Delaware Gross Receipts Tax
- Applies to all businesses operating in Delaware (no deductions for business expenses).
- Tax rates vary by industry:
| Business Type | Tax Rate |
|---|---|
| Retail | 0.7468% |
| Services | 0.307% |
| Manufacturing | 0.126% |
- Due Monthly or Quarterly, depending on revenue.
- No threshold exemption—even small businesses must pay.
Employer Payroll Taxes in Delaware
If your business has employees, you must:
- Withhold state income tax from employee wages.
- Pay Delaware Unemployment Insurance (UI) tax.
- Comply with federal payroll tax requirements (Social Security, Medicare, and FUTA).
Payroll Tax Due Dates:
- Monthly or semi-weekly withholding for state income tax.
- Quarterly filings for unemployment tax.
Personal Income Tax for Pass-Through Businesses
LLCs, S-Corps, and partnerships do not pay corporate income tax. Instead, business income passes through to the owners’ personal income tax returns.
- Delaware personal income tax ranges from 0% to 6.6%.
- Due April 30 each year.
How to File and Pay Delaware Business Taxes
Step 1: Identify Your Tax Obligations
- LLCs and corporations must pay franchise tax.
- C-Corps operating in Delaware must file corporate tax returns.
- All businesses must pay gross receipts tax if operating in the state.
Step 2: Register for Business Tax Accounts
- Franchise tax and corporate income tax: File with the Delaware Division of Corporations.
- Gross receipts tax: Register with the Delaware Division of Revenue.
- Payroll taxes: Register for withholding and unemployment tax accounts.
Step 3: File and Pay on Time
- E-file taxes through the Delaware Division of Revenue website.
- Submit paper filings by mailing tax forms.
- Pay online via credit card, ACH transfer, or check.
Step 4: Keep Tax Records for at Least 3 Years
- Maintain financial statements, tax returns, and receipts for audits.
Common Business Tax Mistakes to Avoid
- Missing Franchise Tax Payments
- All Delaware businesses must pay annually—even if they are inactive.
- Not Registering for Gross Receipts Tax
- Businesses operating in Delaware must register and file gross receipts tax.
- Failing to Withhold Payroll Taxes
- If your business has employees, you must deduct state income tax.
- Not Filing Federal Taxes
- LLCs must file IRS Form 1065 or Schedule C.
- Corporations must file IRS Form 1120 or 1120S.
- Missing Tax Deadlines
- Late franchise tax payments incur penalties and interest.
- Corporate tax returns must be filed by April 15.
IRS Compliance & Delaware Business Tax Filings
| Business Type | Federal Tax Form | State Tax Requirement |
|---|---|---|
| LLC (Single-Member) | Schedule C (Form 1040) | $300 franchise tax |
| LLC (Multi-Member) | Form 1065 & K-1s | $300 franchise tax |
| S-Corp | Form 1120S | $300 franchise tax |
| C-Corp | Form 1120 | $300 franchise tax + corporate tax if operating in DE |
What Happens If You Don’t Pay Delaware Business Taxes?
| Missed Tax Payment | Penalty |
|---|---|
| Franchise Tax | $200 penalty + 1.5% monthly interest |
| Corporate Tax Late Filing | 5% per month, up to 50% of tax due |
| Late Payroll Tax Payments | Up to 10% penalty |
Failure to pay taxes can result in suspension or revocation of business status.
Conclusion
All businesses registered in Delaware must pay franchise tax, corporate tax (if applicable), and gross receipts tax. Timely tax payments prevent penalties and maintain compliance.
For expert Delaware business tax guidance, schedule a meeting with our CPA Anshul Goyal by clicking at https://calendly.com/anshulcpa/ now.
Frequently Asked Questions (FAQs)
1. Do Delaware businesses pay state taxes?
LLCs pay a $300 franchise tax, while C-Corps operating in Delaware pay an 8.7% corporate tax.
2. When is the Delaware franchise tax due?
- March 1 for corporations.
- June 1 for LLCs and LPs.
3. Do Delaware businesses pay sales tax?
No, Delaware does not have a sales tax, but businesses may owe gross receipts tax.
4. Can a Delaware LLC avoid state taxes?
Yes, if an LLC does not operate in Delaware, it only pays the $300 franchise tax.
5. Should I hire a CPA for Delaware business tax filing?
Yes, a CPA can help with tax compliance, deductions, and filing strategies.