Delaware tax question...

[walter]

Hi everybody!

My company has just paid the tax for Delaware which is around 200$ each year. Is there a State where you don't pay any tax at all? I think I heard something about Nevada but I am not sure. Do you have an idea?
Wally

[aangelica]

Every state gets paid one way or the other. Nevada does not impose a corporate income tax, but there is an annual filing fee of $125 (or more, depending on the amount of authorized shares).

And if you have a Nevada corporation and it does business in another state, the other state will require you to file for a certificate of authority as a "foreign" or out-of-state corporation and will require its own annual fee...plus, depending on the state, you could be liable for tax on the income generated by the Nevada corporation within that state.

Hopefully, you're not doing business in California; California imposes a minimum annual franchise tax of $800 on all domestic and foreign corporations that do business there.

As we often say at the office, you can't avoid taxes, you can only mitigate them.

[walter]

Thank you for your answer aangelica.

So if I understood correctly, Delaware would be the best choice in terms of cutting down taxes?

[aangelica]

No. Annual fees and taxes are two different things. Delaware does not impose corporate tax on income derived from sources OUTSIDE of Delaware. In-state income is another matter. And if your Delaware company is doing business in another state, then you're still faced with the same issue of foreign qualification and having to pay tax (and annual fees) to that other state.

[Evan]

Also, some states (like Rhode Island) impose a minimum tax ($500), which is almost similar to a franchise tax. If I'm paying the minimum tax every year, it's not really worth incorporating in Delaware because I'm paying those fees plus Rhode Island's... Foreign corporations also have to pay that $500, so it'd be more costly to do that.

It's similar in other states; because the government wants their money. The only way to try to change such laws is to write your legislators.