Questions founders ask us

Form 1040 is for US citizens and residents, who report worldwide income. Form 1040-NR is for non-resident aliens, who report only US-source income.

Which applies turns on the substantial presence test and your immigration status, not on where you were born. Getting it wrong means filing the wrong return entirely.

Form 1040-ES is how individuals pay estimated tax on income that has no withholding: self-employment income, K-1 distributions, interest, and capital gains.

It runs on a quarterly schedule rather than annually. Owners drawing from a pass-through entity usually need it, because no employer is withholding on their behalf. More on Form 1040.

A free tool that runs both of Delaware's calculation methods side by side. You enter authorised shares, issued shares, and gross assets, and it shows what each method produces.

It exists because the state defaults to the authorised shares method, which gives an alarming figure for a company with 10,000,000 authorised shares. The other method usually costs far less.

A corporation incorporated in Delaware and taxed under subchapter C, meaning it pays tax at the entity level and can have unlimited shareholders, including foreign ones, across multiple stock classes.

It is the structure US investors expect. Our Delaware C-Corp guide covers what it involves.

Your EIN itself is never cancelled — it's a permanent federal number. What you close instead is the IRS business account tied to it, by sending a letter with your business name, address, and reason for closing.

The ABC test is a worker classification standard used by several states, including California. A worker is an employee unless all three prongs are met, covering control, work outside the usual course of business, and an independent trade.

It is stricter than the federal test, so a worker can be a contractor federally and an employee under state law.

Not for a standard single-class formation with a straightforward founder split. Those are templated, and a service or platform handles them.

A lawyer earns their fee when there is an unusual split, existing IP to assign, a foreign parent, or investors already involved. Our Delaware incorporation guide covers the standard path.

Yes, if the US company will have an Indian subsidiary, because FEMA rules then require India-resident founders to hold their shares through a personal Indian LLP. Founders who aren’t India residents don’t need one.

Almost certainly not. Solicitations offering to prepare corporate minutes or certificates of good standing for a fee are a long-running scam aimed at newly incorporated companies.

Delaware does not require you to file minutes. Real state correspondence comes from the Division of Corporations or your registered agent.

The recurring compliance that follows a new company: federal and state returns, Delaware franchise tax and the annual report, registered agent renewal, contractor 1099s, and foreign reporting such as Form 5472 where ownership requires it.

Most of it is calendar work, and missing dates is what creates penalties.

Yes, through the IRS IRIS or FIRE systems, or via a filing provider. For most businesses it is now mandatory rather than optional.

If you file 10 or more information returns in total across all types, electronic filing is required. Our 1099 guide covers the process.

A failure-to-file penalty charged monthly on the tax owed, with a separate and smaller failure-to-pay penalty running alongside it.

Filing on time and paying late costs far less than the reverse, so file even if you cannot pay. Our Form 1040 guide covers the obligations.

It reports an S corporation's income, deductions, and credits, and allocates them to shareholders on Schedule K-1 so they report their share personally.

The company itself generally pays no federal income tax. Our comparison of corporate returns covers how it differs from a C-Corp filing.

Any corporation with a valid S election in place for the tax year, filed via Form 2553.

The election has to be accepted before the return is due. If it was never made or was made late without relief, the company files a standard Form 1120 instead.

If you paid a US contractor or vendor for services above the annual reporting threshold, yes, and the 1099-NEC is the form.

Payments made through a card or a third-party platform are reported by the processor on a 1099-K instead, so issuing your own would double-report the same money.

Yes. IRS Direct Pay, your IRS online account, and EFTPS all accept estimated payments, and all three give you a confirmation.

EFTPS is worth enrolling in if you also make business deposits, since it handles both. Enrolment takes several days because the IRS mails a PIN.

The one-off correction that prevents income being counted twice or missed entirely when you change accounting method. It captures the cumulative difference as of the change date.

A negative adjustment is generally taken in full in the year of change; a positive one is usually spread across four years. More on Form 3115.

You are taxed as the shares vest, on the value at each vesting date rather than at grant. If the company grows, that can mean income tax on paper gains with no cash to pay it.

There is no late filing option. The usual responses are restructuring future grants or, rarely, a new grant.

It reports transfers of property, including cash above a threshold, from a US person to a foreign corporation.

Funding your Indian subsidiary from the US parent can trigger it. The penalty is a percentage of the transferred value, so it is worth checking before the wire goes out. Our Form 926 guide.

The Corporate Transparency Act created the requirement for certain US companies to report who ultimately owns or controls them to FinCEN, in a beneficial ownership information report.

The aim is to stop shell companies being used to hide ownership. Who must file has shifted since the rule took effect. Our BOI guide covers current scope.

The stock plan is the legal document governing how equity is granted. The option pool is the number of shares reserved under it.

People use the terms interchangeably, but you need the plan adopted and the pool reserved before any option can be granted. Investors look at the pool as part of fully diluted ownership.

Yes, as an attachment to Form 1120 through IRS e-file.

The exception is a foreign-owned single-member LLC, which files Form 5472 with a pro forma 1120 even though it has no other return, and that combination has historically gone by fax or mail.

Yes, you owe it for the part of the year up to your dissolution date. Delaware will not accept your dissolution filing until your franchise tax is cleared, and you also submit a final franchise tax report to settle what is owed. Paying early helps, because unpaid balances add penalties and interest and can hold up the whole process.

10,000,000 authorized, with a smaller number actually issued to founders, is the standard template. It leaves room for an option pool and future rounds.

Authorizing more does not help and raises franchise tax under Delaware's default calculation method.