In contrast with the state of Wyoming, operating a Delaware company includes several taxes both fixed and variable. Mainly, these are franchise tax, state corporate income tax, and annual personal income tax. Imposing of such taxes may vary depending on your residency status and active sales operations. Keep in mind that you still have to pay the state corporate tax and annual filing fees in both states.
Some domains of the U.S. offer a great number of benefits such as tax incentives, low annual costs, and so on. Delaware and Wyoming are the most famous of these “business-friendly states”. These two states not only impose friendly taxation but also have a much lower cost of forming and doing a business, comparing to the other states in the U.S. Whilst some states impose annual fixed taxes with the name of franchise tax; the remaining impose a variable one or not even one. Now, let us look at these differences between these two states in more detail.
There are several similarities and differences between the state of Delaware and Wyoming. The most outstanding feature of owning a Wyoming company is not being subject to state personal income tax, state corporate income tax, or franchise tax, at all. Comparing with Wyoming, the Delaware Division of Corporations impose all of these three taxes. So, following your Delaware incorporation processes, your company will be liable for a flat-rate $300 franchise tax, annually (on the date of publishing this article). The franchise tax is a flat-rated and obligatory tax, regardless of your company type. Furthermore, keep in mind that if you own Delaware incorporated company shares and reside outside of Delaware, your shares will not be subject to Delaware taxes.
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Assuming that you do physical business and reside in Delaware, additional tax liabilities might be imposed on your Delaware company depending on your operational and legal structure. In similar to the state of Wyoming, having an operationally active Delaware C-Corp will require you to pay the federal corporate tax, which is currently a rate of 21%. Additionally, the distribution of dividends among the shareholders residing in Delaware will cost them paying the income tax regarding the dividend payments, which will also result in double-taxation. Having an operationally active LLC will ensure you more flexible taxation. You may choose to file taxes of your operationally active LLC, either on a disregarded entity basis or C-Corp taxation mentioned above. A significant advantage of the disregarded entity taxation is being able to file the taxes of your Delaware company with your personal income taxes to the IRS. This taxation method will surpass double taxation, inherently. By having a Wyoming company, you will no longer have to worry about these corporate, income, and franchise taxes; but keep in mind that you still have to pay the annual filing fee each year, which is a fee of about $50 in most cases. Including a full-service taxation consultancy regarding your complex tax issues, Clemta offers a complete consultancy in terms of your incorporation and post-incorporation procedures. You may check our website and add required services to your cart with one-click, as your first step of the incorporation phase. Clemta will handle the rest for you.