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Excerpt:
Let’s say you run a tennis ball company in California that rakes in $100m/year in net income.
In California, you’ll pay a state income tax (8.84% of net income) — and possibly an alternative minimum tax (6.65%) — in addition to the federal corporate tax rate of 21%.
By incorporating in Delaware, though, you can likely save millions in taxes with something called the “Delaware loophole.”
In Delaware, intangible assets — think trademarks, copyrights, and leases — are free from taxation. Companies will often transfer these assets to a Delaware subsidiary and pay their own subsidiary for the rights to use said assets.
Author(s): Zachary Crockett
Publication Date: 10 April 2021
Publication Site: The Hustle