If you want to start and run a Delaware limited liability company (LLC), you'll need to prepare and file various documents with the state. This article covers the most important ongoing reporting and state tax filing requirements for Delaware LLCs.
Unlike most states, Delaware does not require LLCs to file annual reports. However, the state does require LLCs to pay an annual tax (see below).
When it comes to income taxes, most LLCs are so-called pass-through tax entities. In other words, the responsibility for paying federal income taxes passes through the LLC itself and falls on the individual LLC members. By default, LLCs themselves do not pay federal income taxes, only their members do.
Delaware, however, imposes an annual tax on LLCs. The tax, which recently increased, is a flat $300 and is payable to the DOS. The tax is due on or before June 1. There is a $200 penalty for late payments. You can pay the tax online at the DOS website.
In some cases, the owners of an LLC choose to have their business treated like a corporation for tax purposes. This choice is made by filing IRS Form 2553 with the IRS. (See the IRS website for the form.) The State of Delaware, like almost every other state, taxes corporation income. The Delaware corporation income tax is a flat 8.7% of federal taxable income. The tax is payable to the Division of Revenue (DOR). Use the state's corporation income tax return (Form 1100). For more details, check Nolo’s article, 50-State Guide to Business Income Tax, or the DOR website.
Does your LLC have employees? If so, you'll need to pay employer taxes. Some of these taxes are paid to the federal government (the IRS) and are not covered here. (But note that federal employer tax obligations start with obtaining a federal employer identification number (EIN).) However, Delaware employers also must pay taxes to the state.
First, you'll need to withhold and pay employee income taxes to the DOR. Begin by registering your business with the DOR either online (at Delaware’s One Stop website) or on paper (using Form CRA, Combined Registration Application). Once you've registered, you'll need to file withholding taxes on a periodic basis (for example monthly or quarterly). You'll also need to file an annual reconciliation of your LLC's tax withholding using some version of Form W-3. For more information, including regarding online filings, check the DOR website.
In addition, you'll probably need to register to pay state unemployment insurance (UI) taxes. These taxes are handled through the Delaware Department of Labor (DOL). You can register for these taxes online or on paper using Form UC-1, Report to Determine Liability. Then, each quarter, use Forms UC-8 and UC-8A to report on wages and pay the UI taxes. For more information, including regarding online filings, check the DOL website.
Delaware is one of just a few states that does not have a sales tax. However, Delaware does have a gross receipts tax, which is a tax on sellers of goods. The tax is based on a seller's gross revenues. Rates for the gross receipts tax currently range from .1006% to .7543% depending on the type of business involved. For more information, including how to register for and pay the tax, check the DOR website.
If you will be doing business in states other than Delaware, you may need to register your LLC in some or all of those states. Whether you're required to register will depend on the specific states involved: each state has its own rules for what constitutes doing business and whether registration is necessary. Often activities such as having a physical presence (a business location) in a state, hiring employees in a state, or soliciting business in a state (such as by telephone, print ads, mail, or the Internet) will be considered doing business for registration purposes. Registration usually involves obtaining a certificate of authority or similar document.
For more information on the requirements for forming and operating an LLC in Delaware, see Nolo’s article, 50-State Guide to Forming an LLC, and other articles on LLCs in the LLC section of the Nolo website.