In Canada, if your company don't make any money, you don't file anything, and the company dissolves.
So imagine my surprise at the Rocket Lawyer letter stating I owe 100k+ USD in taxes for a corporate registry that has not turned any revenue to speak of or expenses.
am I going to get extradited over this shit? God damn, I really wish they would've been clear that if you register through Stripe Atlas, you will somehow owe 100k+ in taxes. I thought taxes can only be collected if your company made the money, how can they expect me to pay this?
I'm absolutely freaking out right now. There's no way I can pay this. It's fucking ridiculous that I have to pay taxes just for registering a delware company.
edit: MODS, why did this get flagged? I'm trying to find fucking answers, this is not helping me.
>Besides the high rate of corporate taxation (one of the highest of all developed economies), the IRS tax code has huge penalties for noncompliance. For instance, if you intentionally disregard filing a bank reporting form (the FBAR), you’ll face serious penalties, including jail time, a $50,000 fine
Were you required to file a bank reporting form and didn't over 2 years? (ie $100k ) ??
From irs.gov:
United States persons are required to file an FBAR if:
1. the United States person had a financial interest in
or signature authority over at least one financial account
located outside of the United States; and
2. the aggregate value of all foreign financial accounts
exceeded $10,000 at any time during the calendar year
reported. [1]
[1] https://www.irs.gov/businesses/small-businesses-self-employe...
EDIT: Updated information to most recent rather than 2014
https://corp.delaware.gov/paytaxes/
>Foreign Corporations must file an Annual Report with the Delaware Secretary of State on or before June 30 each year.
(ie if he opened acct in Apr 2017, he'd have missed 2 filings by now)
This is what you need to know: https://www.cooleygo.com/so-you-owe-thousands-in-delaware-fr...
You should owe $400 ish based on issued shares and assets.
https://flagtheory.com/stripe-atlas/ didn't exist when I signed up.
https://icis.corp.delaware.gov/ecorp/logintax.aspx?FilingTyp...
You have to enter the value of your net income and assets, and after you've done that it will update to the ~$400 amount.
I don't understand why I owe taxes on a company with zero revenue, zero expenditure. I literally just registered with Stripe Atlas thinking it would be cool to own a US corp for future fund raising.
Big fucking mistake.
When you incorporate, you are (quite literally) making a person. That is an incredible responsibility and frankly, I'm not sympathetic to anyone who takes such a drastic step without bothering to do any homework.
In terms of advice, you've missed two filing deadlines, so this is a lawyer situation. I'd ask about retroactively killing off that company as it had no assets, revenue or stream of business as of the last filing date.
And next time, seriously, it doesn't matter if someone else does the paperwork for you. You are still creating a person in a foreign country!!
OK so you should not worry about this. Delaware uses Authorized Share Method to calculate franchise tax. With 10 million shares this ends up being a hefty sum. Instead, you could pay using Assumed Par Value Method and your tax will go down to something like $250/year including penalty.
You can select preferred method while paying this tax online. See https://www.cooleygo.com/so-you-owe-thousands-in-delaware-fr... for example.
well to anyone who is thinking of using Stripe Atlas and is not American:
DO NOT FUCKING DO IT."Well to anyone who is thinking of creating a business entity in the US which is taxed under US laws without doing the proper research regarding US taxes..."
I fixed that for you.
The state of Delaware has something called franchise taxes, which there are two ways to calculate. https://corp.delaware.gov/frtaxcalc/ Revenue is not a factor under either method; you can think of this more as a renewal fee than an income tax.
If a company does not file their franchise taxes, Delaware will send them a letter demanding taxes. To put a number on that letter, Delaware uses the Authorized Shares Method. This returns a different number than the Assumed Par Value Capital Method.
Since companies are allowed to pick whichever is in their interest when they file their taxes, companies receiving that letter will often not pay the number on it.
Stripe Atlas companies can calculate, file, and pay their Delaware franchise tax through our tax tool. Overwhelmingly, they pay the minimum tax when filing on time: $400. There is a minor additional charge for late filed taxes.
Since we are aware that the state of Delaware sends letters on this matter which are confusing to many founders if those founders fail to file their taxes, we aggressively get in touch with Atlas founders around tax time.
One question which is not clear for me - is it possible to dissolve a company through Stripe Atlas?
Stripe Atlas does not help you dissolve a company, it's an extra few hundred dollars in fees and more if you hire ppl.
In total, my mistake is going to cost me around 1000 USD, vs 100k. It was wrong for me to assume that Stripe Atlas would explain these potential pitfalls, all of which were not made clear when I signed up.
I think just for future cases, it would be great to explain these hidden costs like on this site:
https://flagtheory.com/stripe-atlas/
Had I been made aware of that site, I wouldn't have done it. The cost and legal exposure to the Land of Lawsuits was a stupid decision.
If you are not American, don't use Stripe Atlas like flagtheory writes on his website....if Patrick didn't promote it I wouldn't have joined Atlas in the first place so obviously he's doing a good job, but really wish that the hidden costs and risks are made clearer to non-Americans.
that is all. I don't hold a grudge against patrick or stripe, in the end, I did not do my own due diligence, and just blindly trusted what was advertised. it's my fault that I'm in this situation and I apologize if I have used strong languages, waking up to fact that you owe 100k in taxes, in an unfamiliar land, can cause panic.
waht if I don't pay? are they gonna come after me?
edit: just went to the delaware website, it says to wire them 80,000 USD or else. sent them an email to get clarification.
If you don't pay, the company eventually becomes void and you can no longer trade.
They don't come after you for unpaid franchise taxes on a void company - even for the $400.
Did you transfer large amount of money to your business?
I definitely won't be doing this again as a non-American.
Really wish they would've been more explicit about the true costs of establishing a business in USA
So like everyone else said.... get a lawyer.
... or fake your death..
I don't think there is a minimum cost for federal, but Delaware does accumulate fees if you don't dissolve the corporation:
There is a minimum tax of $175 and a minimum filing fee of $50; so there is a minimum Delaware franchise tax and annual report payment total of $225 a year for Delaware domestic corporations. Domestic corporations must file by March 1 or face a $200 penalty, and a 1.5% interest rate on the amount due. Source: https://www.delawareregisteredagent.com/how-to/file-delaware...
Now the sensible thing for you to do would be to contact stripes. Nothing else.
You are required to file separate tax returns each year to each entity (so you pay both federal and state taxes). (If you are from Canada, "states" are roughly equivalent to "provinces".)
Since you mentioned "franchise taxes", it looks like you are looking at the State of Delaware's taxes (and not the IRS).
In Delaware, franchise taxes can generally be calculated using two different methods: (1) Authorized Shares Method (number of shares you authorized); and (2) Assumed Par Value Capital Method (generally based on the value of the assets in your company). See https://corp.delaware.gov/frtaxcalc/.
Most startups have been told to authorize 10 million shares in their incorporation paperwork. In Delaware, if you select the calculation method based on the number of shares, and you authorized 10 million shares, you could be surprised by a very expensive "initial" franchise tax calculation.
Others have already linked to a good article discussing this "surprise" bill: https://www.cooleygo.com/so-you-owe-thousands-in-delaware-fr....
The solution is to look closely at your franchise tax bill and read about the option to calculate your taxes using the Assumed Par Value method.
If you cannot afford a lawyer, contact the State of Delaware Division of Corporations directly to discuss how to use the Assumed Par Value method to calculate your franchise taxes. See https://corp.delaware.gov/contact/ (the Franchise Tax contact number is (302) 739-3073 option 3).
Good luck.
The good news is you will be fine. It's just clerical. You won't be extradited and they won't drain your account.
In addition to the other advise, look up free legal hotlines. They're really friendly and can sometimes give you information that isn't easily googleable.
Good luck. The national sport in America is ignoring bills.