Delaware LLC Taxes

LLC Pass-Through Taxation

By default, LLCs don't pay taxes directly. Instead, the LLC members report the income (or losses) on their personal Form 1040 tax return. This is called pass-through taxation — tax responsibility "passes through" the LLC to its owners.

How Are LLCs Taxed in Delaware?

By default, a Delaware LLC is taxed by the IRS based on the number of members:

• An LLC with 1 owner (Single-Member LLC) is taxed like a Sole Proprietorship
• An LLC with 2+ owners (Multi-Member LLC) is taxed like a Partnership

These are the "default" statuses — automatically applied based on member count. You can also elect to have your LLC taxed as a Corporation (S-Corp or C-Corp) by filing extra paperwork with the IRS.

Single-Member LLC (default)

The IRS treats Single-Member LLCs as Disregarded Entities — the LLC doesn't file its own federal return. Instead, the owner reports LLC income on their personal Form 1040 (Schedule C if owned by an individual).

Multi-Member LLC (default)

Multi-Member LLCs file a Form 1065 Partnership Return and issue a Schedule K-1 to each member. Each member then reports their share of profits on their personal Form 1040.

Electing Corporate Taxation

• S-Corporation: File Form 2553 with the IRS. Can reduce self-employment taxes once the LLC has consistent profits (generally $70,000+ net income per member). Speak with an accountant first.
• C-Corporation: File Form 8832 with the IRS. Uncommon for small LLCs. Primarily useful for large employers offering healthcare fringe benefits.

Delaware State Income Tax

Delaware has a state income tax at rates of 0%–6.6% (graduated; no tax on out-of-state income). LLC members report their share of LLC profits on their Delaware state tax return.

Delaware is unique — it does not impose income tax on income earned outside of Delaware. Single-Member LLC owners file Delaware Form 200-01 for Delaware-sourced income. Multi-Member LLCs with Delaware activity file Form 300. Many Delaware LLCs formed by out-of-state residents with no Delaware operations owe no Delaware income tax.

Contact the Delaware Division of Revenue at 302-577-8200 for more information.

Delaware Special LLC Taxes

Delaware Gross Receipts Tax

Delaware does not have a traditional sales tax. However, certain types of businesses operating in Delaware are subject to a Gross Receipts Tax (GRT) based on total revenue — not profit. Rates vary by business type (e.g., 0.1004% for manufacturers, 0.7468% for retailers). Contact the Division of Revenue to determine if your LLC is subject to the GRT.

Local Income Tax

You and/or your LLC may also need to file and pay income taxes with your local municipality (city, county, etc.). Contact your local government or hire an accountant to confirm local requirements.

Delaware Sales Tax

Delaware does not have a state sales tax — one of only a handful of states with this advantage. However, some local jurisdictions may still impose use taxes. Check with your accountant or local government to confirm.

Delaware LLC Payroll Taxes

If your Delaware LLC has employees, you must handle payroll taxes, which include:

• Federal income tax withholding
• Delaware state income tax withholding
• Social Security and Medicare taxes (FICA)
• Federal unemployment tax (FUTA)
• Delaware state unemployment tax (SUTA)

Payroll calculations are complex — most LLC owners hire a payroll service or accountant.

Delaware Tax Agency Contact

Delaware LLC Taxes — FAQs