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Most startups use the Assumed Par Value Capital Method to calculate their franchise tax bill. This method almost always results in a lower tax for our customers because startups generally have few assets but authorize millions of shares. No par value stock is assigned a value of $100 per share for purposes of the above calculation. Thus, it is generally advisable to avoid no par value stock and to assign a very low par value to shares if possible.<\/p>\n<\/p>\n
So if your Delaware corporation has a million authorized shares, your annual franchise tax will be approximately $7,500. Typically, this corporation is better off to use the second calculation option. This method calculates the tax based on the number of shares your corporation has authorized. Your corporation will owe an estimated $85 for each 10,000 shares authorized. The minimum tax when using this method is $175, and the maximum tax is $200,000.<\/p>\n<\/p>\n
The tax under this method is $400 per $1,000,000, or portion thereof, of assumed par value. Authorizing excessive shares of stock can result in a higher annual franchise tax liability. A large widely held public company might have difficulty reducing their authorized and\/or issued shares but a start-up technology or life sciences company may have more flexibility. Ideally, Delaware Franchise Tax liability should be quantified prior to incorporating in the state and prior to any new shares being authorized or issued. Assumed Par Value Capital MethodWith this method your Delaware Franchise Tax bill is calculated based on issued shares, authorized shares and total gross assets. Authorized Share Method5000 shares or less, pay the minimum $175 tax.5001 to 10,000 shares pay $250 tax.For each additional 10,000 shares, add $75 to the tax total, with a maximum franchise tax of $180,000.<\/p>\n<\/p>\n
This amending my return<\/a> option is fairly simple; 5000 shares or less you pay the minimum $175. If your DE Corporation has high value assets, the Assumed Par Value Capital Method is more complicated, but sets a cheaper tax fee. It is mandatory for Delaware Corporations to file their annual franchise taxes online. There are several variables that enter the Assumed Par Value Capital Method including the corporation\u2019s gross assets, issued shares, number of authorized shares and their par value. Delaware provides a Microsoft Excel worksheet that can be used to show the tax based on various assumptions.<\/p>\n<\/p>\n For more help with form 990 for nonprofits<\/a> tax and compliance matters, see How can my corporation get help complying with Delaware\u2019s requirements?.<\/p>\n<\/p>\n