Formation and federal tax setup
The first tasks establish your company's legal and tax identity. Most venture-backed startups form as Delaware C-Corporations, because investors expect it, Delaware corporate law is well developed, and only C-Corp stock can qualify for the QSBS exclusion under IRC §1202. If you are bootstrapping and don't plan to raise institutional money, an LLC taxed as a partnership or S-Corp may be cheaper to run.
After formation:
- Get an Employer Identification Number. The online application on irs.gov issues an EIN immediately; Form SS-4 is the paper route.
- Open a business bank account in the company's name. Mixing personal and company funds weakens liability protection and makes the books harder to close.
- File any founder 83(b) elections within 30 days of the stock grant. There is no extension.
- Pick a tax year. A C-Corp can generally choose a calendar year or any fiscal year; partnerships and S-Corps are generally limited to a calendar year unless they show a business purpose (§706(b), §1378).
If an LLC or corporation wants S-Corp status, Form 2553 is due no later than 2 months and 15 days after the start of the tax year the election is to take effect, or any time in the prior year. For a calendar-year company that is March 15. Late-election relief exists but is not automatic.
State registrations and foreign qualification
A Delaware corporation that operates elsewhere must also register, or foreign qualify, in each state where it has offices, employees or significant operations. For a Delaware C-Corp headquartered in California, that means registering as a foreign corporation with the California Secretary of State and filing with the Franchise Tax Board. California's $800 minimum franchise tax does not apply in the corporation's first taxable year, but it does from year two.
State accounts are usually separate:
- Income or franchise tax (in California, the Franchise Tax Board)
- Sales tax, if you sell taxable goods or services (California's CDTFA)
- Payroll tax and unemployment insurance (California's EDD)
Cities add their own layer. San Francisco, for example, requires a Business Registration Certificate and has its own gross receipts based business taxes. Check the city treasurer's site for current thresholds.
One filing you no longer need: a Beneficial Ownership Information report. FinCEN's March 2025 interim final rule exempted all companies created in the United States, and its August 2026 final rule made that permanent. Only foreign entities registered to do business in a US state still file.
Put every registration renewal, annual report and franchise tax date on a single compliance calendar. Missing a state filing can cost good standing, which shows up at the worst time: during due diligence.
Payroll setup and employment taxes
If you have employees, including founders paid through payroll, you need federal and state payroll accounts and a deposit schedule.
Federally, you deposit withheld income tax plus Social Security and Medicare through EFTPS. New employers usually start as monthly depositors, meaning each month's taxes are due by the 15th of the next month. You file Form 941 quarterly and Form 940 annually, and furnish W-2s to employees and file them with the Social Security Administration by January 31.
States add income tax withholding, unemployment insurance and, in states such as California, New York, New Jersey, Hawaii and Rhode Island, disability insurance. Each has its own registration and deposit rules, and remote employees in a new state create new accounts.
Use a payroll provider from the first paycheck. Late federal deposits cost 2% to 10% of the late amount depending on how late, and 15% once the IRS has demanded payment (§6656). The provider fee is small by comparison.
For contractors, collect a Form W-9 before the first payment. For payments made after December 31, 2025, you file Form 1099-NEC only for contractors you pay $2,000 or more in the year, up from $600, and the threshold is indexed for inflation after 2026.
Estimated taxes and key first-year deadlines
A C-Corp must make estimated tax payments if it expects to owe $500 or more of federal income tax for the year. Installments are due the 15th day of the 4th, 6th, 9th and 12th months: April 15, June 15, September 15 and December 15 for a calendar-year company. Each is generally 25% of the lesser of this year's tax or last year's, but the prior-year option isn't available after a short or zero-tax year, and a corporation with $1 million or more of taxable income in any of the three prior years can use it only for the first installment.
Owners of S-Corps and partnerships pay individual estimates instead, due April 15, June 15, September 15 and January 15. California requires corporate estimates in 30%, 40%, 0% and 30% installments, and the first one must cover at least the $800 minimum tax once it applies.
Key dates for a calendar-year Delaware C-Corp:
- January 31: W-2s and 1099-NEC to recipients and the government
- March 1: Delaware annual report ($50) and franchise tax (minimum $175 or $400, depending on method)
- March 15: Form 1120-S and Form 1065, if you are an S-Corp or partnership
- April 15: Form 1120 and first estimated payment, or Form 7004 to extend filing to October 15
- May 15: Texas franchise tax report, if you have Texas nexus
If a foreign person owns 25% or more of the corporation, Form 5472 is attached to the 1120; the penalty for missing it is $25,000.
R&D credits, §174A, startup costs and depreciation
Several federal rules shape first-year taxable income.
Startup and organizational costs: under §195 and §248 you can deduct up to $5,000 of startup costs and $5,000 of organizational costs in the year business begins. Each allowance shrinks dollar for dollar above $50,000, and the rest is amortized over 180 months.
Research costs: for tax years beginning after December 31, 2024, domestic research and experimental expenditures are deductible immediately under §174A, added by the One Big Beautiful Bill Act. Foreign research is still amortized over 15 years. Older guidance telling you to capitalize domestic R&D over five years describes the 2022 to 2024 rules.
R&D credit: the §41 credit is available from year one, even with no revenue. Qualifying costs include wages for qualified research, supplies, and 65% of contract research. A qualified small business (gross receipts under $5 million and no receipts before the five-year period ending with the current year) can elect on a timely Form 6765 to apply up to $500,000 a year against payroll taxes, claimed on Form 8974. Your §174A deduction is reduced by the credit unless you elect the reduced credit under §280C(c).
Equipment: 100% bonus depreciation is permanent for qualified property acquired after January 19, 2025, so laptops and servers are generally deductible in the year placed in service.
We set up first-year clients with the elections and the calendar together, because most expensive mistakes come from a missed date, not a misread rule. Figures were checked against IRS, FinCEN and Delaware sources in October 2026; this is general guidance, not tax advice for your specific facts.
Frequently asked questions
What taxes does a startup file in its first year?
A Delaware C-Corp startup typically files Form 1120 federally, a state income or franchise tax return in each state where it has nexus, the Delaware annual report and franchise tax, and payroll returns (Forms 941 and 940 plus state filings) if it has employees. It also files Forms 1099-NEC for contractors paid $2,000 or more after 2025, and Form 5472 if a foreign person owns 25% or more.
When is a C corporation's first tax return due?
A calendar-year C corporation's Form 1120 is due April 15 of the following year, or October 15 if it files Form 7004 for an automatic six-month extension. The extension covers filing only, not payment, so estimate and pay any tax owed by April 15. A fiscal-year corporation files by the 15th day of the fourth month after its year ends.
Does a new Delaware C-Corp pay California's $800 minimum tax in its first year?
No, a corporation that incorporates or qualifies in California is exempt from the $800 minimum franchise tax in its first taxable year. It still files a California return for that year, and the minimum tax applies from the second taxable year onward. California corporate estimated payments then follow a 30%, 40%, 0% and 30% schedule, with the first installment covering at least the $800 minimum.
Do startups need to file a BOI report in 2026?
No, startups formed in the United States do not file beneficial ownership information reports with FinCEN in 2026. FinCEN's March 2025 interim final rule exempted all US-created companies, and its August 2026 final rule made that permanent. Only foreign entities registered to do business in a US state must still report, so a Delaware C-Corp can drop BOI from its compliance calendar.
What is the deadline to file an 83(b) election?
An 83(b) election must be filed with the IRS within 30 days after the stock is transferred to you, and there is no extension. For founders receiving restricted stock subject to vesting, missing the window means paying ordinary income tax on the value of each tranche as it vests instead of on its value at grant, which is usually close to zero for a newly formed startup.
