Compliance & tax
The entity, the federal and state returns, franchise tax, sales tax, 1099s and the annual calendar.
10 lessons4 nested pages105 minFree
Which filings and taxes does a US startup owe, and when? This track answers it on the books of Northwind Traders, Inc., the one company every track in the course is taught on.
The 10 lessons
- Keeping a Delaware corporation in good standingHow do I keep a Delaware corporation in good standing?
- Delaware franchise tax, worked both waysHow is Delaware franchise tax calculated, and why is my bill so high?
- Form 1120: the federal return, the extension and the 21% rateWhen is Form 1120 due, and what does a startup C corp owe in federal income tax?
- Corporate estimated tax: four installments a yearDoes my C corp have to pay quarterly estimated taxes, and how much?
- State income and franchise taxes: one idea, many namesWhich state taxes does a startup corporation owe, and why are they called different things?
- Sales tax nexus: physical presence, Wayfair and economic thresholdsWhen does a startup have to collect sales tax in another state?
- Registering, collecting and filing sales taxHow do I register for, collect and file sales tax?
- Information returns: 1099-NEC and 1099-MISCWhen are 1099-NEC and 1099-MISC due, and who gets one?
- Foreign owners and beneficial ownership: Form 5472 and BOIDoes my startup need to file Form 5472 or a BOI report?
- The annual compliance calendar, 2026–2027What are a startup's tax and compliance deadlines for the year?
The words this track teaches
Each links to its glossary definition, with the authority behind it.
- Registered agentThe person or company, with an address in the state, that a corporation must keep to receive legal process and the state's notices. Delaware sends its annual report and franchise tax notices to the registered agent each December
- State annual reportThe yearly filing a corporation makes with its state of formation and each state where it is qualified — officers, directors, address, and in Delaware the figures the franchise tax is computed from. Names, fees and due dates vary by state
- Foreign qualificationRegistering a corporation formed in one state to do business in another — a Delaware corporation with its office or staff in California files there, appoints an agent there and files that state's annual report. "Foreign" means another state, not another country
- Good standingA state's confirmation that a corporation exists and is current on its annual reports and franchise taxes. In Delaware a year of unpaid franchise tax makes the charter void; banks, investors and other states ask for the certificate
- Delaware franchise taxThe annual tax every Delaware corporation owes for the privilege of being incorporated there, whether or not it does business or makes money there — the lower of the authorized shares method and the assumed par value capital method, minimum $175 or $400, maximum $200,000, due with a $50 annual report by March 1 and prorated in the first year
- Authorized shares methodThe default Delaware franchise tax calculation, from the number of shares the charter authorizes: $175 for 5,000 shares or fewer, $250 for 5,001 to 10,000, and $85 for each further 10,000 or part of 10,000, up to $200,000. It is what Delaware's notice computes, and for a startup with millions of authorized shares it runs to five figures
- Assumed par value capital methodThe alternative Delaware franchise tax calculation: assumed par (total gross assets ÷ issued shares) times authorized shares, taxed at $400 per $1,000,000, minimum $400 — usually far below the authorized shares method for a startup with millions of authorized shares
- Authorized sharesThe number of shares a corporation's certificate of incorporation permits it to issue — the ceiling, not what anyone holds. Issued shares are those actually sold or granted; the authorized shares method of the Delaware franchise tax counts the ceiling
- Large corporate filerA Delaware corporation with stock listed on a national securities exchange that reports consolidated gross revenues or assets of $750 million or more — it pays a flat $250,000 annual franchise tax instead of the $200,000 maximum
- AccrualAn expense incurred, or revenue earned, before it is invoiced — recorded at period end so it lands in the right period
- Accrued liabilityAn obligation for goods or services received but not yet invoiced or paid — wages, interest, professional fees — recorded by an accrual
- Form 1120The federal income tax return of a domestic C corporation, filed every year whether or not it has taxable income — due the 15th day of the 4th month after year end, April 15 for a calendar year, with tax at 21% of taxable income under IRC §11(b)
- Form 7004The IRS application for an automatic extension of time to file business income tax returns — six months for Forms 1120, 1120-S and 1065 — filed by the original due date. It extends the time to file, not the time to pay
- Net operating lossThe excess of tax deductions over gross income for a year. Federal NOLs arising after 2017 carry forward indefinitely, cannot be carried back (farming aside), and may offset only 80% of taxable income computed before the NOL deduction
- NOL deduction capA limit on how much of a year's income a loss carryforward may offset — federally 80% for post-2017 NOLs; in the states it varies: Pennsylvania caps pre-2025 losses at 40% and later ones at 50% in 2026, rising ten points a year to 80% from 2029, and some states suspend NOL deductions outright in deficit years
- Income tax expenseThe P&L charge for income taxes — current tax payable for the period plus the change in deferred tax assets and liabilities
- Temporary differenceA difference between an asset or liability's tax basis and its book carrying amount that will reverse in future years — the source of deferred taxes
- Corporate estimated taxThe four installments a corporation pays toward the current year's income tax when it expects $500 or more — on the 15th day of the 4th, 6th, 9th and 12th months of its tax year, each 25% of the required annual payment, through EFTPS. Underpayment is figured on Form 2220; Form 1120-W is historical
- Prepaid expenseCash paid before the benefit is consumed — an asset until it is. "Prepayment" is the UK and IFRS word for the same asset; a customer paying us early is a customer advance or deposit, a liability
- Gross receipts taxA tax on a business's gross receipts with no deduction for costs, levied on the seller — Washington B&O, Ohio CAT, Nevada commerce tax, New Mexico GRT, Arizona TPT. An operating expense, not an income tax under ASC 740; Texas's margin tax, measured on a modified gross margin, is treated as an income tax
- Economic nexusA connection with a state created by economic activity alone — sales into the state above a threshold — rather than physical presence. The basis of remote-seller sales tax since South Dakota v. Wayfair (2018), and of many states' income and franchise taxes, where P.L. 86-272 still shields solicitation of tangible goods sales
- ApportionmentDividing a multistate business's taxable income among states by formula — historically property, payroll and sales; now in most states the sales factor aloneConvention
- Market-based sourcingAssigning receipts from services and intangibles to the state where the customer receives the benefit, for the sales factor — the rule in most statesConvention
- IRC conformityHow a state's income tax adopts the federal Internal Revenue Code — rolling (as currently amended), fixed-date (as of a stated date, updated by legislation) or selective. A fixed-date state may not follow §174A, bonus depreciation or other recent federal changesConvention
- Municipal net profit taxA city income tax on a business's net profits, usually paired with a tax on wages earned in the city — Ohio municipalities, Philadelphia, Wilmington, Kansas City and St. Louis. Filed with the city, not the state
- Sales tax nexusThe connection with a state that obliges a seller to collect its sales tax — physical presence, or economic nexus from sales into the state above a threshold (commonly $100,000) since South Dakota v. Wayfair (2018)
- Physical presence nexusThe connection with a state created by being in it — an office, a shop, inventory, employees — which obliges a seller to collect its sales tax from the first sale. Before South Dakota v. Wayfair (2018) it was the only basis on which a state could require collection
- Remote-seller grace periodThe time a seller with no physical presence has, after crossing a state's economic nexus threshold, before it must register and collect — immediately, the first day of a following month, or the next calendar year, depending on the stateConvention
- Marketplace facilitatorA platform — Amazon, Etsy, eBay — that every sales-tax state requires to collect and remit sales tax on sales it facilitates for third-party sellers; the seller does not collect again on those salesConvention
- Sales tax payableSales tax charged to customers and not yet remitted to the state — a liability from the moment it is collected, never revenue, when the entity has elected to exclude such taxes from the transaction price
- Exemption certificateThe document a buyer gives a seller to claim a sales tax exemption — resale, manufacturing, an exempt organization — which the seller keeps to prove why it did not collect. New Mexico's version is the nontaxable transaction certificate (NTTC)Convention
- Home-rule sales taxA local sales tax that a home-rule city administers itself — its own license, return, base and audit — rather than through the state. Common in Colorado, Louisiana and Alabama
- Vendor's compensationThe share of collected sales tax a seller may keep, in states that allow it, for filing and paying on time — usually a small percentage, often cappedConvention
- Voluntary disclosure agreementAn agreement in which a business with unfiled state tax obligations comes forward before the state contacts it — often anonymously at first — and files and pays a limited lookback period, typically three to four years, with penalties waived and interest usually dueConvention
- Use taxThe buyer-side complement of sales tax, owed at the same rate on taxable goods and services used in a state when the seller did not collect sales tax — self-assessed and remitted by the buyerConvention
- Information returnA return that reports a payment to the IRS and to the person paid, rather than computing a tax — Form 1099-NEC, 1099-MISC, 1099-K, W-2, 3921. Due dates are per form, and §7503 moves a weekend date to the next business day
- Form 1099-NECThe IRS information return for nonemployee compensation paid to a contractor in the course of business — required at $600 a year for payments through 2025 and $2,000 from 2026 (indexed from 2027), due to the recipient and the IRS by January 31
- Form 1099-KThe information return from a payment settlement entity reporting a payee's gross payment card and third-party network receipts — card transactions at any amount; third-party network transactions only above $20,000 and 200 transactions, the threshold the OBBBA retroactively reinstated. Gross of refunds, chargebacks and fees, so it never ties to revenue
- Form W-9The IRS form a US payee gives a payer to certify its name, tax classification and taxpayer identification number — collected before the first payment, because it drives 1099 reporting and backup withholding
- Backup withholdingFederal income tax a payer must withhold at 24% from reportable payments — contractor fees, interest, dividends, card settlements — when the payee has not given a correct TIN or the IRS has notified the payer to withhold. Deposited and reported on Form 945
- Combined Federal/State Filing ProgramThe IRS program that forwards 1099s filed electronically to participating states, satisfying their filing requirement — though many states still require direct filing, or a reconciliation return of their own
- Form 5472The IRS information return a US corporation that is 25% or more foreign-owned at any time in the year — or a US disregarded entity wholly owned by a foreign person — attaches to its income tax return to report transactions with related foreign parties. $25,000 penalty for each failure to file, and $25,000 more for each 30 days it continues past 90 days after IRS notice
- Beneficial ownership information reportThe report of a company's beneficial owners to FinCEN under the Corporate Transparency Act. Since the March 2025 interim final rule and the final rule effective August 14, 2026, companies created in the United States and US persons are exempt; only entities formed under foreign law and registered to do business in a US state still report