Postponing Incorporation Until Jan 1 Can Save a Bit of Tax

If you’re forming a startup late in the year, consider pushing the incorporation filing back to January 1. This will save you $350.

Delaware charges a $350 annual franchise tax for each calendar year your startup is in existence, even if you incorporate on December 31. It’s not prorated.

That said, $350 isn’t a ton of money in the grand scheme of things. There may be other good reasons to incorporate ASAP. The big reason is that incorporation separates your personal assets from the startup’s assets, and limits you liability. You will also need to incorporate to get your EIN (tax ID number) and to open a company bank account. If those items can’t wait, then just incorporate and pay the extra tax.

Also, make a note that the DE franchise tax is due on March 1, not April 15. Many first time founders miss this deadline and end up paying a small tax penalty.