Interests in entities that are consolidated with the Delaware reporting company must be included in “total gross assets” at a value determined in accordance with GAAP. You can calculate your corporation’s franchise tax using the Assumed Par Value Capital Method when you file the annual franchise tax report on the Delaware Division of Corporations website. Simply report your corporation’s total gross assets and the number of shares issued when completing the online filing. Foreign Corporations, Nonprofits, Limited Liability Companies, General Partnerships, Limited Partnerships and Limited Liability Partnerships pay a flat-rate annual fee or tax. There are two methods that corporations can figure their annual franchise tax. The default method for the State of Delaware is the Authorized Share Method.

How to figure out your corporate franchise tax in Delaware:

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Authorized Share Method vs Assumed Par Value Capital Method: Which is Right for You

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 semimonthly vs biweekly 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.

1. A corporation generally has one year from the date of filing to amend a Delaware Franchise Tax return and claim a refund.
2. All corporations using either method will have a maximum tax of $200,000.00 unless it has been identified as a Large Corporate Filer, then the tax will be $250,000.00.
3. Typically, this corporation is better off to use the second calculation option.
4. You can calculate your corporation’s franchise tax using the Assumed Par Value Capital Method when you file the annual franchise tax report on the Delaware Division of Corporations website.
5. Delaware Franchise Tax calculations are prorated if a corporation’s authorized and/or issued shares change during the year.

This method calculates the tax based on your corporation’s total gross assets and the ratio of issued shares to authorized shares. Your corporation will owe an estimated $400 for each $1,000,000 in gross assets. The minimum tax when using this method is $400, and the maximum tax is $200,000. Form 1120 Schedule L for tax year ending prior to filing the Delaware franchise tax report. Thus, for a calendar-year taxpayer, total assets reflected in a corporation’s March 1, 2021 Delaware franchise tax filing should tie to Form 1120, Schedule L for the tax year ending in 2020. If the federal income tax return is on extension, other financial data will need to be used for total gross assets.

Key Considerations of Franchise Taxes

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.

This article discusses how the tax is calculated, filing and payment due dates and other requirements applicable to for-profit C corporations that incorporate in Delaware. In addition to paying the Franchise Tax, Delaware requires every corporation to have and maintain a registered agent in the State. This is profit and loss statement a person or a representative that is physically located in Delaware.

Most startups use types of accounts 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.