An Overview of Startup Taxes
Starting a company often requires you to register for state, local and federal taxes. Below is a quick guide to registering your business and the taxes you'll be required to pay.
Due to tax advantages, most venture-backed startups register as a C-Corporation based in Delaware. As a corporation in Delaware, you'll need to pay various taxes depending on the nature of your business and your financial situation. Here are some of the taxes that you may need to pay as a corporation in Delaware (note: many of these apply in other states as well):
Corporate income tax: If your corporation is based in Delaware or conducts business in the state, you'll need to pay corporate income tax on your profits. The corporate income tax rate in Delaware is 8.7%, which is one of the lowest rates in the country.
Franchise tax: All corporations that are incorporated in Delaware or conduct business in the state are required to pay a franchise tax. The franchise tax is based on the value of your corporation's authorized capital stock, and the rate varies depending on the amount of capital stock.
Sales and use tax: If your corporation sells goods or services in Delaware, you'll need to pay sales tax on those transactions. The sales tax rate in Delaware is 6%, which is one of the lowest rates in the country.
Property tax: If your corporation owns property in Delaware, you'll need to pay property tax on that property. The property tax rate in Delaware varies depending on the location of the property.
Employment taxes: If your company has employees, you'll need to pay employment taxes on their wages. These taxes include federal and state unemployment insurance tax, as well as federal and state income tax withholding.
Personal income tax (situational): If your SaaS company is a sole proprietorship, partnership, or S corp, the profits from your business will be taxed as personal income on your personal tax return. The personal income tax rate varies by your income level.
It's important to note that these are just a few of the taxes that you may need to pay as a corporation in Delaware. There may be other taxes that apply depending on your specific situation. It's always a good idea to consult with a tax professional or the Delaware Division of Revenue to ensure that you're paying all of the taxes that you're required to pay.
To register for federal, state and local taxes, please see the steps below: