Delaware LLC Taxes

Delaware is one of the most popular states to form a business due in part to its attractive taxation qualities, such as having no sales tax. But starting up a business can be difficult, and navigating the laws and taxes of a state can make the task seem overwhelming.

Regardless of the size of your business, if you operate a limited liability company (LLC) in Delaware, you will need to ensure you stay up to date on your finances and pay federal, state, and local taxes. Our guide will help you understand which taxes you will need to pay for your Delaware LLC.

Recommended: Schedule a free consultation with an accountant to stay on top of your taxes. 

Delaware Franchise Tax

While LLCs in Delaware do not have to file an annual report to the state as corporations do, they still have to pay an Annual Franchise Tax. 

Each year, your LLC will need to pay $300 in order to meet the restrictions set by the State of Delaware. This can only be paid online and is due on June 1 each year. The Delaware Corporations Information System allows you to pay the franchise tax or learn more about the process.

Delaware LLC Taxes Owed

LLCs benefit from pass-through taxation, meaning the business’s profits pass through to the members’ individual tax returns. As a result, your LLC itself does not pay taxes to the federal government or to the State of Delaware. Instead, LLC owners will pay taxes on their portion of the income made by the LLC.

In Delaware, LLC owners can expect to pay the following taxes:

Federal Taxes

Regardless of where your business is located, if you have an LLC within the United States, you will have to pay federal income taxes and federal self-employment taxes. These taxes are reported on your Form 1040.

Federal Self-Employment Taxes

It doesn’t matter if your LLC is a single-member LLC or a multi-member LLC; all LLC members must pay self-employment taxes on their share of the LLC’s profits. The self-employment tax rate is 15.3%. 

Federal Income Taxes

Your federal income taxes will depend on your tax bracket, and the cutoffs for individual tax brackets, as well as the percent owed, will change each year.

Delaware State Taxes

Every state has its own laws which affect their businesses and individual citizens on how they are taxed. For example, Delaware is one of the few states that does not have a sales tax which makes it a popular place to live and work. Below are important state taxes you should know about when operating an LLC in Delaware.

Delaware Income Taxes

The income tax rate for Delaware is 6.6%, which puts it slightly above the national average of 6.4%. While this may not be the most attractive rate available, it is by all means not as high as some other states (some have income tax rates higher than 10%).

Delaware Sales and Use Tax

Delaware is one of the few states in the country that does not have a state sales tax. In fact, there are no local sales taxes, either.

Delaware Gross Receipts Tax

While there is no sales tax in Delaware, businesses will need to pay the Gross Receipts Tax each year. This tax is on the total gross revenue of the business, and the amount taken can vary depending on several factors, including the type of business. The tax rate currently ranges between 0.0945% of total gross revenue to 0.7468%. You can visit the Delaware Division of Revenue’s Tax Tips page to help determine your business’s tax rate.

The Division of Revenue also has a Gross Receipts Tax FAQs page for more information on this tax. 

Additional State Taxes

Delaware’s Department of Revenue oversees the collection of various taxes that businesses may have to pay depending on their location, industry, and number of employees. 

These are a few taxes that business owners in Delaware may be responsible for paying:

  • Communications Service Tax
  • Surtax
  • Motor Vehicles Fuel Tax

To learn more, check out the Delaware Division of Revenue website for more information on the state-level taxes and additional taxes your business may need to pay. 

Delaware Local Taxes

The local laws and ordinances will vary across the counties and cities of Delaware. Regardless of where you live in the state, we recommend you check with your local jurisdiction and ensure that your business obtains the proper local permits and follows any local regulations that may impact your business’s operation.

Delaware LLC Compliance

You must obey Delaware’s state and local laws to maintain your business's compliance and good standing. Remember that you must file your LLC taxes with the state as well as pay for your Gross Receipts tax.

Delaware LLC Annual Franchise Tax

While they do not have to file an annual report like LLCs do in other states, Delaware LLCs do have to pay an Annual Franchise Tax. As mentioned above, this will cost $300 and must be paid by every LLC formed in Delaware. 

This tax must be paid online by June 1 each year. If you are late with your payment, you will be charged a late fee of $200 and be penalized 1.5% interest for every month unpaid. You can pay your Annual Franchise Tax at the Delaware Corporations Information System website.

For more information on the Annual Franchise Tax, visit our How to Start an LLC in Delaware guide.

LLC taxes are complex. While our guide can provide you with important information, we recommend you schedule a free consultation with an accountant to ensure that you handle your business taxes correctly.