How to Mitigate and Legally Reduce State Corporate Taxes

Each state has its own independent corporate tax scheme which may create additional reporting obligations and expenses for your business. Depending on the state of incorporation of your business, the answer to how to mitigate and reduce state taxes can vary widely. In Texas, the State does not impose a corporate income tax but does assess franchise taxes on a corporation’s margin, defined as 70% of the taxable entity’s total revenue1 as set forth in greater detail under Texas Tax Code Chapter 171. To the contrary, every domestic or foreign company doing business in Delaware is required to file and pay a tax of 8.7% on its federal taxable income that is allocated and apportioned to Delaware. 

To mitigate these tax schemes, RR&A has worked in the past with companies and their CPAs to proactively structure corporate shares based upon different value reporting methods and authorized share methods to result in a lower tax burden for fledgling companies in various states. We can help to address the realities of your tax burden and engage in sensible corporate structuring designed to reduce your liabilities and exposure.

1 An amount computed by determining the taxable entity's total revenue from its entire business and/or subtracting the greater of a million or the cost of goods sold or compensation.

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Disclaimer: The information and material on this website is general information about our practice and firm. This information does not offer specific legal advice and the use of this information does not create an attorney-client relationship with RR&A or any of its attorneys. The information on this website should not be used for legal advice, and persons should not act upon the information on this website without engaging professional legal counsel.


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