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That's the cost of the structure investors expect, and for a company running at a loss while it raises money, it's a cost mostly put off. Here's what it files and pays.
| Obligation | What | When |
|---|---|---|
| Form 1120 | The corporate income tax return, on the company's worldwide profit, at the flat federal rate of 21% | 15 April for a calendar year, or 15 October with Form 7004 |
| Form 5472 | Attached to the 1120 for each foreign shareholder of 25% or more the company had transactions with | With the 1120 |
| Estimated tax | Quarterly payments once the year's tax is expected to be $500 or more | 15 April, 15 June, 15 September and 15 December |
| Withholding on dividends | 30%, or the treaty rate, withheld when a dividend is paid to a foreign shareholder, and reported on Forms 1042 and 1042-S | Paid over as withheld; reported by 15 March |
| Form 1099-NEC | For each US contractor paid $2,000 or more in the year | 31 January |
| Payroll | Only if the corporation employs people in the US | Quarterly and yearly |
A corporation with no profit still files a return showing no tax, along with Form 5472 for its foreign shareholders, and the $25,000 penalty for missing Form 5472 applies to corporations just as it does to LLCs.
Delaware charges its corporations a $50 annual report fee and a franchise tax, both due by 1 March. The franchise tax can be worked out two ways, and you pay the lower figure. The authorised shares method starts at $175 for 5,000 shares or fewer and rises quickly with more shares. The assumed par value capital method has a $400 minimum. A startup with millions of authorised shares and few assets usually pays less under the second method, often the $400 minimum, which puts the yearly total at about $450. Delaware doesn't charge income tax on a corporation that doesn't operate there. Paying late adds a $200 penalty and 1.5% interest a month, and a corporation that goes a year without paying or filing loses its charter.
Delaware sends its notice to your registered agent in December, and the figure on it may be worked out by the authorised shares method: $175 for up to 5,000 shares, $250 for up to 10,000, then $85 for each further 10,000. For the 10 million shares a startup typically authorises, that's $85,165. Don't pay it. File the annual report with the company's issued shares and total gross assets, which lets Delaware use the assumed par value method, and a young startup usually owes the $400 minimum.
Delaware also warns of letters from private companies asking corporations to pay for "corporate records" or meeting minutes. They aren't from the state. Pay only through the Division of Corporations' own site or your registered agent.
When the corporation pays a dividend to a foreign shareholder, it withholds 30%, or the lower rate in the shareholder's treaty, and pays it to the IRS. That's the double tax: 21% on the profit, then withholding on what's paid out. Startups avoid it by not paying dividends, which they weren't going to do anyway. A profitable business owned from abroad that isn't raising money usually avoids it by being an LLC.
A corporation run day to day by founders abroad is a US corporation for US tax. It may also count as resident where the founders live, if that country treats companies as resident where they're managed. Tell your accountant at home where decisions are made. The country pages cover the rules for many countries.
Every plan puts 1 March and 15 April on your calendar. Form 1120 and Form 5472 are for you or your accountant to file. With annual state compliance, at $149 a year, we file the Delaware annual report and pay the franchise tax for you, at cost.
Sources
Checked by Saais Patel against these official pages.
Next in EIN and tax:State income tax and your LLC: why forming in Wyoming isn't what keeps you out of it