2026 tax year · Delaware
Is an S-corp election worth it in Delaware?
On $100,000 of profit the election saves about $4,877 a year in Delaware, after everything Delaware charges the company.
Work it out on your own numbers
The figures below use $100,000 of profit and our standard assumptions. Put your own in instead, this compares staying a sole proprietor against electing, with Delaware's own charges on the company included:
Salary share and withdrawal share are percentages. The withdrawal figure only affects the C corporation, it is what decides whether the second layer of tax applies at all.
Enter your figures above and press Compare.
What the election is worth on $100,000 of profit
A single filer taking the standard deduction, paying themselves 40% of profit as salary, with $1,500 a year of payroll and filing cost:
| Tax as a sole proprietor | $27,464 |
| Tax as an S-corp, federal and personal state | $22,412 |
| Saving from the payroll-tax split alone | $5,052 |
| What Delaware charges the company | − $175 |
| Net saving | $4,877 |
Delaware charges the company plus a $175 minimum.
- Delaware gross receipts tax. Delaware gross receipts tax, 0.0945%-1.9914% of gross receipts by activity, with monthly exclusions generally starting at $100,000. It is charged on turnover rather than profit, so it cannot be worked out from net profit alone. And it is owed whether or not the business made money.
The profit range where it actually pays in Delaware
From about $20,000 of profit upwards. Below that, the $1,500 of payroll cost is more than the saving.
| Net profit | Sole proprietor | S-corp, all in | Difference |
|---|---|---|---|
| $60,000 | $14,730 | $11,845 | saves $2,885 |
| $100,000 | $27,464 | $22,587 | saves $4,877 |
| $150,000 | $45,774 | $38,271 | saves $7,503 |
| $250,000 | $80,305 | $73,557 | saves $6,748 |
What Delaware does differently
Delaware taxes the profit either way. Whether you take it as self-employment income or as salary plus distribution, roughly $5,566 of Delaware income tax sits on $100,000 of profit, the election moves the payroll-tax half of the bill, not the state half.
The Delaware detail
Delaware recognizes the federal election and imposes no entity-level income tax, but every Delaware-incorporated corporation owes annual franchise tax with a $175 minimum under the authorized shares method (or $400 minimum under assumed par value capital) plus a $50 annual report fee, regardless of where it operates or whether it profits.
We rate our confidence in this entry as medium: some of it comes from tax publishers and professional bodies rather than from Delaware's own revenue department. Confirm it before acting on it.
How much salary to pay yourself
Enter your figures above and press Calculate.
Less salary means less payroll tax, so the arithmetic always points at the smallest salary you can justify. That is exactly why it is not a number to optimize: compensation has to be reasonable for the work you do, and the penalty for getting it wrong is reclassification plus back payroll tax. The cheapest row here is the riskiest one.
| Salary share | Salary | Distribution | Total tax | vs sole proprietor |
|---|---|---|---|---|
| 20% | $20,000 | $76,970 | $18,909 | $8,555 |
| 30% | $30,000 | $66,205 | $20,661 | $6,804 |
| 40% | $40,000 | $55,440 | $22,412 | $5,052 |
| 50% | $50,000 | $44,675 | $24,163 | $3,301 |
| 60% | $60,000 | $33,910 | $25,914 | $1,550 |
What this assumes
- Single filer, standard deduction, the business as the only income.
- 40% of profit taken as salary in the headline figures.
- $1,500 a year for payroll and a separate 1120-S, a cost estimate, not a tax figure, and it varies by provider.
- Comparing against a sole proprietorship. If you already trade through an LLC, some state fees are owed either way and are not a cost of electing.
- Anything listed as not modeled above is genuinely owed, it is excluded because it does not depend on profit, not because it is nil.
What these words mean
- Net profit
- What your business earned after business expenses, before any tax. It is the figure the self-employment tax is charged on, not what you took out of the business.
- Gross receipts
- Everything the business took in, before subtracting any costs. A tax on gross receipts is owed even by a business making a loss, which is what makes it different from a tax on profit.
- Franchise tax
- A charge for the privilege of operating as a company in a state. Despite the name it has nothing to do with franchises, and it is often owed whether or not the business made money.
- Entity level
- A tax charged to the company itself, before any profit reaches the owners, as opposed to a tax the owners pay on their own returns.
- Distribution
- Profit paid out to a company’s owner that is not salary. It is not subject to payroll or self-employment tax, which is the whole point of the S corporation election. And why the salary has to be defensible.