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Startup maintenance for the first-time founders: Taxes and Reporting for Delaware C Corp
Unlike all the specific articles on nuances, this one will give you a very general overview of what you need to do. I almost missed March 1 deadline because I didn't know it!
* Not tax advice, etc, etc…
The sad truth about running a company in the US is that there are no guidelines or people like a corporate secretary that will tell you what you need to do next. You are thrown into the ocean and told to swim. Therefore, I thought it will be useful to summarize the annual reporting requirements, which I had to gather piece by piece from various sources (including YC's knowledge base, which was the most comprehensive).
So what to file and when
March 1st—Delaware annual report and franchise tax. It’s filed online, can be done by yourself, takes 5-10 minutes, and only requires basic information about the company and one new number—"Gross Assets," which you will take from the financial report. Essentially, this is just an extension of the company registration. You will have to pay $450 with your card immediately, just don’t forget to press "recalculate"
April 15th—Corporate Income tax. This is the so-called Form 1120, which should be completed by a CPA (make sure they have a PTIN, to be licensed to sign it) → It is filled out based on financial reports (income statement, balance sheet, and general ledger) → A CPA can create all these reports for you once based on your bank statements (if you have a blank company, for example), OR, a more long-term and correct option, you can generate them with accounting software (Xero/Quickbooks), which you will use to keep your bookkeeping up-to-date → For this, you need to actually keep books, i.e. sit down once a month, match your bank transactions with entries in this software, attach invoices, and categorize them. Accounting is a whole separate topic, which we'll talk about later.
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Who should do this? Some parts of it you can do by yourself, you can find a CPA on Fiverr/Upwork to go through it once, or you can hire a permanent CPA or subscribe to a bookkeeping service like Pilot/Fondo/Sleek, where you just send them invoices, and they will keep your books. As far as I understand, it depends only on the workload and level of involvement. The one thing that I always have been confusing is that bookkeeping, accounting, and tax filing are separate tasks (even though they depend on each other), but they can all be done by one person called CPA.
Since you are most likely a non-US resident and own more than 25% of the company, you must also file Form 5472 for "foreign investors"!
In addition to 1120, you may need to file a 1099 or W-2 if you hire in the US, and for contractors outside of America—W8-BEN (deel collects them automatically).
You will also need to file State Income tax and Sales tax if you conduct business and have sales in particular states. It’s done separately for each state, but you probably won't need it initially.
I'm sure I missed something here, and there are still things I don't know, but this should give you a general idea of the scope of the work to estimate. In terms of money, you should budget for a thousand USD if you're just starting out. In terms of time, expect that bookkeeping will take time, you’ll have to search invoices all around the internet, and CPAs might be busy during the peak season. But no one ever died from it, so, chill down.
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