Aidi — Taxes

Now that you’ve successfully incorporated your startup in Delaware, the next step is to know and figure out important fillings that are mandated by the government for your business. For founders who are considering incorporating in the US, this article will be of help in letting you know what to expect after the incorporation has been done.

Let’s dive in;

• IRS Federal Income Tax

Whether you operate on Mars or a tiny island on the Atlantic, there is an annual income tax you must file as a foreign entity registered in Delaware. Most online apps like Stripe, Atlas, etc won't explain all of these. 

This annual income tax is usually called Form 1100 and other forms have to be filed but a proper tax attorney that works with you or the agency you use will give more information on the specific form to file based on your own case. Moreso, Aidi can help out with this, providing you with well-detailed information about this. Bear in mind that this filing is compulsory, irrespective of whether you make money in the US or overseas (i.e. your local country or country of operation).

Secondly, which is most important? If the US entity owns 100% of the Nigerian entity then IRS wants to see all your bank statements from Nigeria in your filings which means you must do a consolidated P&L statement as well as a balance sheet. If you hide your Nigerian activities they will find out at a much later time in the future and add up penalties for years you failed to comply.

However, if you are yet to regularize 100% ownership at CAC in Nigeria to the US entity then you are fine on this, but it's best to disclose your Nigerian activities to either your own or Aidi's tax attorney (as the case may be) so they can advise you better as it's on a case by case basis.

It is also good to note that filing for this through Aidi agents if your activities are still small is between $400 - $800 so it varies based on your transaction volume and this is very cheap with Aidi as you are using a very experienced and large firm attorney with years of experience that can help save you money. However, you can also hire your own agent or attorney as it's left to you.

• Delaware Income Tax

This is different from franchise tax and this is where many startups get this wrong.

In the US, states are different from countries under federal law. So, the state and federal arms of the government collect taxes from local and foreign companies.

So as a Delaware entity, you are meant to file this annually. Another thing to note also is that if you live in California or Texas and operating your African startup from there you have automatically activated the state DBA clause which states that if any founder or management of a company owns a Delaware company and lives in another state then he or she must pay company income taxes to both Delaware and that new state as well as respective franchise taxes.

• Delaware Franchise Filing

This is the standard filing annually to Delaware which keeps your company active in the US, it's like the CAC annual filing. Remember if you live anywhere else in the US. Then you need to file for both the state you live in and Delaware also or else you’ll have to pay a $1k - $2k fine.

These filings are payments to a local registered agent who helps with all your annual state filings and deals with state government as well as can help you file for getting your EIN. It is required by federal law. Kindly note that taxes are handled by attorneys while registered agents handle company filings.

These are the 3 key filings to do. There are others but it's only based on a case-by-case basis and if needed which most times they are not. Need help with Delaware incorporation and filing for your startup? Send an email to team@aidi.africa to get started.