Corporate Taxation Deep Dive: Double Taxation Versus Pass-Through for Your US Company
When setting up a US company, founders must navigate a complex landscape of legal and tax structures. This choice profoundly impacts long-term liability and profitability. US federal law defines two primary tax paths: double taxation and pass-through taxation. While federal rules provide a baseline, state-level regulations add significant complexity. Selecting the right state for your US company is crucial for minimizing tax burdens. Below, we analyze Delaware, Wyoming, and Florida—three states that offer distinct tax environments for every US company.
Understanding US Company Tax Structures
The Internal Revenue Service (IRS) dictates how a US company is taxed based on its legal formation. The specific entity type determines the payment method and the level of scrutiny the US company faces from tax authorities.
Double Taxation: The C-Corporation Model
A C-Corporation is often the standard choice for a high-growth US company. These are treated as separate legal entities and face “double taxation”:
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The US company pays federal income tax on its corporate profits (the first layer).
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The US company then distributes remaining profits to shareholders as dividends.
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Shareholders pay personal income tax on those dividends (the second layer).
Pass-Through Taxation: LLCs and S-Corps
Most small to medium-sized US company owners prefer pass-through structures like LLCs. In this model, the US company itself does not pay federal income tax. Instead, the profits “pass through” to the owners’ personal tax returns, ensuring the US company income is only taxed once.
State Comparison: Delaware (DE) – The Corporate Standard
Delaware is the most prestigious home for a US company, housing over 60% of Fortune 500 entities. However, maintaining a US company here involves specific costs:
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Corporate Income Tax: Delaware imposes an 8.7% tax on any C-Corp US company earning income within the state.
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Franchise Tax: Every US company in DE must pay an annual Franchise Tax. For an LLC US company, this is a flat $300, while for corporations, it varies based on share value.
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Legal Certainty: The main reason to choose Delaware for a US company is its Court of Chancery, which specializes in business disputes.
State Comparison: Wyoming (WY) – The Tax Advantage
Wyoming is a premier destination for a US company seeking privacy and zero state taxes. It is widely considered the most business-friendly state for a new US company.
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No State Income Tax: Wyoming has zero state-level corporate or personal income tax. This allows a US company to avoid the state layer of double taxation.
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Low Maintenance: The annual report fee for a Wyoming US company is just $60, keeping operational costs lean.
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Asset Protection: Wyoming provides robust charging order protections for every US company registered there.
State Comparison: Florida (FL) – The Growth Hub
Florida offers a balanced environment for a US company, especially those with a physical presence or service-based model.
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Corporate Tax Threshold: Florida’s corporate tax is 5.5%, but the first $50,000 of income is exempt, benefiting many a small US company.
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Personal Tax Benefits: Since Florida has no state personal income tax, owners of a pass-through US company retain more of their earnings.
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Compliance: An annual report is required for each Florida US company, with a predictable fee of approximately $138.75.
Summary Table: US Company Tax & Compliance
| State | Corporate Tax (C-Corp) | Personal Tax (Pass-Through) | Annual US Company Fee |
| Delaware | 8.7% | Yes (State Level) | $300 (LLC) / Variable (Corp) |
| Wyoming | 0% | No | $60 |
| Florida | 5.5% ($50k exempt) | No | $138.75 |
Strategic Selection for Your US Company
The choice between double taxation and pass-through depends on the specific goals of your US company.
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Choose a C-Corp: If your US company aims to raise venture capital or go public. Delaware is the best state for this US company trajectory.
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Choose an LLC: If you want to maximize owner distributions and simplify the tax filing process for your US company. Wyoming and Florida are world-class options for this US company model.
Ultimately, a US company must track its “nexus”—where it has employees or physical sales—to ensure full compliance. By selecting the right foundation, a US company can significantly reduce its effective tax rate and administrative burden.