Alco Corporate Services
DE Information
Advantages of Incorporating in DE
Annual Franchise Tax and Registered Agent Fees
Advantages of Incorporating in Delaware
Delaware is the recognized leader in corporate,
limited liability and limited partnership law, the owners and operators of a
Delaware corporation or limited liability company are not required to be
identified in the public records of the State. Also, Delaware has a minimal
corporate franchise tax (as low as $60 per year) that is not based upon income.
In addition there is no Delaware income tax for Delaware corporations or limited
liability companies that do not do business in Delaware.
Delaware is
recognized as having a favorable tax climate. It has no sales tax, no
personal property tax and no intangible property tax on
corporations. In addition, there is no taxation upon shares of stock held by
non-residents and no inheritance tax upon non-resident holders, no tax on
inventories and no tax on process machinery or equipment, and no personal
property tax, no unitary tax, no State-level real property tax.
Also corporation may keep all of its books and records outside of
Delaware. You or your client can
take advantage of these benefits through the use of a Delaware corporation.
By utilizing a
Delaware corporation to own your boat or aircraft rather than
owning it as an individual, you may be able to shelter yourself from the
above-mentioned taxes. Many of boat or aircraft owners recognize that a
sales/use tax will be due in the state they are actually keeping or using the
vessel. They also understand, that under ordinary circumstances, when they
choose to sell the vessel, the new owner will have to pay a sales tax on the
purchase of the vessel. With this in mind, they can choose to put the vessel
into a Delaware corporation, and pay the tax in the corporate name (deriving
other benefits incorporation has to offer such as limited liability). When the
vessel is subsequently put up for sale, the owner has the flexibility of selling
the vessel as an asset of the corporation or selling the entire corporation of
which the vessel is an asset. The sale can be accomplished by simply
transferring the shares of stock in the corporation over to the new owners. This
arrangement can be very attractive to the prospective purchaser because title to
the vessel has not changed hands - it is still registered to the corporation.
Therefore, no sales tax may be assessable on the transfer, and, no
re-registration costs are incurred. Additional tax savings may be realized if the vessel is used
for business purposes.
Partnerships, sole proprietorships and shareholders of S Corporations are not subject to State corporate income taxes. Individuals carrying on business as partners, sole proprietors or who are shareholders of S Corporations are liable for personal income taxes imposed by the State only on their proportionate share of partnership, proprietorship or S Corporate income.
A Delaware Limited Liability Company (LLC) is a hybrid business entity, designed to combine the advantages of a corporation with the tax advantages of a partnership. Like a corporation, the owners of an LLC are not personally liable for the LLC's debts and obligations. Like a partnership, an LLC can be treated as a pass-through entity for tax purposes. Beginning in 1997 the IRS no longer taxes these entities as corporations. They permit the LLC to elect whether taxation as a partnership or corporation best fits the needs of its business and its Members. This may be advantageous for those who cannot meet the IRS requirements for an "S" corporation and desire the tax pass-through treatment.
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At the present time, our position on the issue of establishing an Internet Site is that persons conducting business via the Internet are not treated any differently than persons conducting business by traditional means. The Due Process and Commerce Clause provisions of the U.S. Constitution require that there be a minimal contact or presence in the taxing jurisdiction by the business. There are many activities – too many to list here – which create the jurisdictional right to tax referred to as "nexus". It is our position that merely creating an Internet site by a non-Delaware business does not, by itself, create nexus. But, locating a server in Delaware would create nexus/jurisdiction to tax the respective business.
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The following questions and answers were posed to the Division of Revenue by the Software Publishers Association of 1730 M Street, NW., Suite 700, Washington DC 20036-4510
Q. Are there any tax laws in Delaware that apply to electronic commerce transactions?
A. No.
Q. Do any statutes specifically apply to electronic software distribution (i.e. downloaded) over the internet?
A. No.
Q. Do any statutes specifically apply to the purchase of goods ordered over the Internet and received in tangible form?
A. No.
Q. Is there any liability placed on the buyer or vendor of downloaded software over the Internet? Is electronically distributed software considered tangible personal property? And what liabilities are placed on the buyer and vendor of tangible goods over the Internet?
A. It is our current thinking that the mere use of the Internet as a vehicle for selling tangible property or intangible personal property will not create nexus in the market state. Since Delaware does not have a sales tax, the purchase of software will not create a tax liability for the purchaser.
Q. Are services performed over the Internet, such as providing financial information for a fee, subject to sales tax? What tax rate and state would be used? Is the tax rate based upon where the service is performed or where to whom it applies?
A. Chapter 23 of Title 30 of the Delaware Code imposes a license fee and gross receipts tax on various services rendered within the state. It is our unpublished opinion with respect to services provided via the Internet that such services are situs to the location of the server or main frame from which such information was accessed.
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Annual Franchise Tax & Registered Agent fees.
To maintain the corporation/Limited Liability Company in Good Standing with a Delaware Department of State annual Franchise Tax and Registered Agent fees must be paid.
Corporation
The State of Delaware has a minimal annual franchise tax, which is $50.00 and is due March 1st every year. The Corporate Franchise tax might be higher depending on the amount of shares of your corporation. If you do not file your annual report by March 1st, the State will assess a penalty of $60.00 plus 1 ½ % interest each month until paid in full.
The Registered Agent fee in the amount of $95.00 for companies that use shipping address within continental USA, and $130.00 for companies that use shipping address outside the continental USA must be paid annually along with Franchise Tax Report.
You will receive your franchise tax report in mid January of each year. If you do not receive this report, please contact our office so that we may obtain a duplicate for you. Failure to satisfy the above requirements will cause the corporation to be voided by the State of Delaware and corporation will cease to exist.
You are obligated to inform us, as your provider of registered agent, of your new address and telephone/fax number so we can send your Report on time.
Limited Liability Company
The State of Delaware has an annual tax, which is $200.00 and is due June 1st every year.
If you do not file your annual report by June 1st, the State will assess a penalty of $200.00 plus 1 ½ % interest each month until paid in full, and fee for restoration to Good Standing.
The Registered Agent fee in the amount of $95.00 for companies that use shipping address within continental USA, and $130.00 for companies that use shipping address outside the continental USA must be paid annually;
You will receive your report in mid April of each year. If you do not receive this report, please contact our office so that we may obtain a duplicate for you. Failure to satisfy the above requirements will cause the corporation to be voided by the State of Delaware and Limited Liability Company will cease to exist.
You are obligated to inform us, as your provider of registered agent, of your new address and telephone/fax number so we can send your Report on time.