Delaware for Dummies 2026: the US tax paradise, finally explained

Delaware is in the headlines again these days, and for good reason: the second-smallest US state is a true giant when it comes to the number of companies based there. More than 2 million companies are registered in Delaware. That raises eyebrows. After all, if you believe the reports over here, most of them are "shell companies" and presumably mixed up in gambling or racketeering.

In Europe, Delaware is therefore known above all as a tax haven that fuels corruption and organized crime, and one that supposedly (believe it or not) even outdoes the Cayman Islands.

At the same time, more than two thirds of Fortune 500 companies are registered in Delaware. Facebook, Google and Apple are all Delaware corporations. We have even dedicated a whole page to this topic.

And it is not just the headquarters of American companies. Daimler, Volkswagen, Deutsche Bank, Siemens: when major German groups set up a US subsidiary, they do it in Delaware. You can hardly call those shell companies. 

How do you explain the popularity of Delaware as a place to incorporate? And why do European finance politicians in particular see red whenever they talk about Delaware?

Here is the background.

1Does a corporation (Inc.) registered in Delaware pay no taxes?

In the US (as everywhere in the world), corporate income tax is due on the profits of a corporation.

In the US, both the federal government and the states levy corporate income tax. At federal level, a corporation pays 21% corporate income tax on its profits (US corporate taxation in detail).

The states levy a further 0% to 11.5% corporate income tax on the profits of corporations based there.

Delaware levies no corporate income tax on income from licenses, patents, trademarks and copyrights, or on any of the other typical income of holding companies based in Delaware.

That income is still taxed at federal level at up to 21%, though. So all you save is the state corporate income tax, a relatively small part of the total tax bill.

The bottom line: even if Delaware does not tax some of a corporation's profits, the US federal tax authorities still take a hefty bite. Anyone paying 21% tax is hardly going to believe they are doing business in a tax haven.

2Does an LLC registered in Delaware pay no taxes?

As a rule, partnerships themselves are not taxed. It is the partners who are taxed, paying income tax on their share of the profits.

The same applies in the US.

The most common pass-through entity in the US is the limited liability company (LLC).

Individuals who are members of a US LLC running a trade or business have limited tax liability in the US and must file an income tax return there every year. The LLC also has to file a partnership tax return, but it pays no tax itself. 

3The twist: the single-member LLC or "disregarded entity"

Things get interesting with LLCs that have just one individual as their member. These LLCs are known as "disregarded entities". They are "disregarded" because the IRS, the US tax authority, exempts them from filing financial statements and a tax return.

If the sole member is a US taxpayer, they do not report the LLC's income separately but as self-employment income on their own tax return.

Looking for a US LLC that stays tax-free in the US? Then our sister site zerotax.llc is the place for you. It covers the LLC for owners who live outside the US and whose business does not take place in the US: no permanent establishment, no US tax on the profits. This page is about the opposite: companies that actually operate in the US, have a permanent establishment there and pay US taxes. Both sites are run by the same firm, Mount Bonnell Advisors in Austin.

4New filing requirements for disregarded entity LLCs since 2017

The IRS had long suspected that foreign LLC owners were not exactly sticking to the letter of the law.

Specifically, the agency alleges that LLCs and their owners failed to report large amounts of income taxable in the US (income with a US connection).

That is why, since 2017, every disregarded entity LLC with a foreign owner has to file Form 5472 with the IRS each year; if the LLC has foreign accounts, an FBAR with FinCEN may be required as well.

Basically, these filings are harmless. They are not published anywhere, for example in the business register. Nor do they oblige you to pay US tax on the LLC's profits. They are not particularly complex to prepare either, and Mount Bonnell Advisors is happy to handle them for your LLC.

But things are no longer as anonymous as they used to be, when you did not have to report anything to the US authorities. As we said, the information does not become public, so your privacy screen stays in place.

Let's take a closer look at the two filings:

4.1What is Form 5472?

Form 5472 reports the LLC's transactions with related parties to the IRS, in both directions and including contributions and distributions. That means transactions with the LLC's owner, their relatives and companies in which they have an interest. 

A savvy LLC owner might think they can avoid this filing simply by not paying anything out to themselves or related parties.

Not so fast: because the disregarded LLC is tax-transparent, every payment received into the LLC's account counts as received by the owner. So the LLC's total revenue has to be reported to the IRS (which of course does not mean any tax is due).

Speaking of forms: here you can find out what Form W-8 is for and who has to fill it in.

4.2What is an FBAR?

If you have opened a foreign account for the LLC, for example with a payment provider, you must report it to FinCEN on an FBAR if the combined balance of all foreign accounts exceeded $10,000 at any time during the year.

For an overview of transferring money between the US and Europe , see here.

6Are the members and beneficial owners of a Delaware company really not published in the Delaware business register?

In the US, each state runs its own business register. There is no central authority like Companies House in the UK.

All US business registers are online, and anyone can view the information published there. Each state decides for itself what information has to be filed when a company is formed and what is then published.

This is what an entry in the Delaware business register looks like. We pulled it up on August 31, 2026 in the official Entity Search of the Division of Corporations, and you can look it up there yourself at any time. Our example is Google's parent company:

That is the complete public record. Neither the shareholders nor the management appear in it, not even for a corporation of this size. Only the name, file number, date of formation, entity type and Registered Agent are published.

As you can see for yourself, neither the shareholders nor the management of the company are published in the state register. Only the name and the registered office in Delaware are made public.

So it is true that the privacy of shareholders and management is extremely well protected in Delaware.

Here is what makes Delaware special: when a Delaware company is formed, the state does not even ask for information about its shareholders or management.

The register only asks for the company's name and address. And of course it knows the attorney or accountant who forms the company.

But the actual identity of the people running the company is not known to the authorities in Delaware.

(Which raises an interesting question: how do you actually prove that you hold a stake in the company or are authorized to represent it as a manager?)

Once you open a bank account in the USA, though, you need a tax ID number. To get one, at least one member of management has to be identified to the US authorities. That information is not published, however, so your privacy stays protected.

And since the USA does not take part in the OECD CRS automatic exchange of information, foreign beneficial owners of a Delaware company enjoy particularly strong protection.

That said, Delaware holds no special position in the USA. No US state publishes the shareholders of a corporation in its register, and there are other states besides Delaware that publish practically no information on management either. Delaware is simply the best known.

And once more: the anonymity Delaware offers may sound attractive. The question is what it actually gets you, since it can only be fully maintained without a bank account. How would you use a company without an account in day-to-day business? What would that company do for you?

Bottom line: privacy protection for the shareholders and management of a corporation registered in Delaware is phenomenal, though not unique in the USA.

7So why are so many big corporations registered in Delaware?

For large companies committed to transparency, like Facebook and Google, keeping shareholder data out of the register hardly matters. So why are more than half of all publicly listed US companies registered in Delaware?

The reason is Delaware's extremely business-friendly corporate law. For one thing, the state is very old by US standards and can draw on a wealth of precedent and judicial history. In the USA, where case law applies, that is a major advantage.

For another, corporate cases in Delaware are heard by the Court of Chancery, an old-fashioned state court of equity with no jury. In litigious America that is a big advantage, because professional judges tend to rule in favor of a company rather than in favor of, say, a plaintiff suing it for damages.

Another advantage of Delaware is its efficient infrastructure, tailor-made for business. The state offices keep long hours, and for an extra fee a company can be formed in as little as an hour. That can be decisive in urgent negotiations or sales talks.

Bottom line: Delaware gives large companies tangible advantages in case law and in the efficient administration of corporations.

We explain in detail on a separate page why Delaware is such a popular home for big US corporations. If you want to learn more, click here.

All the key facts about the American C Corporation are summarized here.

8Other US states: Nevada, Wyoming and more

We also want to briefly cover other US states often mentioned in the same breath as Delaware. Top of the list are Wyoming and Nevada, almost as "notorious" as Delaware.

What we said about Delaware applies equally to Wyoming and Nevada:

• No state corporate income tax: Neither state levies corporate income tax, so only federal corporate income tax is due (21%, depending on the amount of taxable profit).

• Good privacy protection: Relatively little information is published in the state register.

But the same limits we mentioned for Delaware apply here too: 

• If you open a bank account in the USA, you need a US tax ID number, and the identity of at least one of the people running the company is inevitably passed on to the authorities. 

• If you open an account outside the USA, it is covered by the OECD CRS automatic exchange of information, and your tax authority at home is informed that the company exists.

Bottom line: whichever US state you choose, for every US company maximum anonymity lasts only until the company opens a bank account.

9What can Delaware do for you?

Delaware offers entrepreneurs real advantages. But don't fool yourself into believing everything you read in an online forum or a newspaper.

There is no doubt that myths surround Delaware, and only some of them hold a grain of truth. With this page, we have tried to set the record straight.

As we said, many US states offer the same or at least similar advantages as Delaware. Whether the Court of Chancery really makes a difference for you, I rather doubt.

Besides LLCs, Mount Bonnell Advisors also forms and manages C Corporations in 8 states (including Delaware), complete with a business bank account in the USA and in Europe, at online banks or traditional institutions.

On request, we can also provide a US-resident director for your company. Only this director's name is passed on to the US authorities where necessary (for example, when applying for the US tax ID number).

You'll find information on the US tax system in our beginner's guide and in our compact introduction to US tax law for European entrepreneurs.

The key terms and facts about US health insurance are here, and here you can find out whether you need to fill out a W-8 form.

In short

• Delaware levies no corporate income tax on a holding company's typical income, such as licenses, patents, trademarks and copyrights. Federal tax of up to 21% still applies.
• Pass-through entities such as the LLC pay no tax themselves; their members are taxed on the profit.
• A foreigner's single-member LLC with no taxable presence in the USA owes no US tax, but since 2017 it has had to file Form 5472 every year. Whether it suits you depends on the tax rules of your home country.
• The Delaware register publishes neither shareholders nor management, but Delaware is not alone in that. Anonymity ends as soon as the company opens a bank account.
• Big corporations come for the corporate law, the Court of Chancery and an administration tailored to business.

How we help you

• US Company FormationLLC, Inc or LP in Delaware, Florida, California, New York, Texas or Wyoming.
• Form a CorporationThe US corporation (Inc) for growth, investors and your visa.
• Form an LLCThe US LLC with a permanent establishment, turnkey in six states.
• Delaware holdingThe holding above your US companies, with one consolidated tax return.
• European Document PackageThe documents banks and authorities in Europe want to see.
• Company formation consultationEntity type, state and tax consequences, before you commit.