Delaware Franchise Tax Calculator

It often includes details about the classes of stock the corporation is authorized to issue, including the par value of each class. For VC-backed startups, it will specifically mention the par value of preferred shares. Any changes to these details typically require an amendment to the Certificate of Incorporation. You’ll need to know your corporation’s gross assets and authorized shares.

Annual Report and Tax Information

For most VC backed startups, the par value will be listed in one or more of the following legal documents. (Make sure you work with experienced attorneys so they don’t mess up important items like par value!) Your lawyer may also have put your par value into your cap table software. The calculator below will help you estimate how much you’ll need to pay.

1. You’ll incur a $200 penalty if you don’t file an annual report on or before March 1.
2. The least amount you’ll pay using this method is $400, and there’s no cap on the maximum.
3. Let’s also assume the number of shares issued and authorized is the same for simplicity’s sake.
4. The minimum tax for companies using the Authorized Shares Method is $175, and the maximum annual tax is $200,000.
5. For these reasons, more than a million businesses are incorporated in Delaware, including more than half of all publicly traded and Fortune 500 companies.
6. The first method is based on the authorized share count, and VC-backed startups with option pools can quickly get to thousands of dollars in taxes due.

The Straight-Up Authorised Shares Method

For C-Corporations, including VC-backed startups that Kruze proudly serves, the Delaware franchise tax and annual report filings are due by March 1st every year. It’s a critical deadline that these corporations must meet to avoid incurring late fees. Alongside their tax payments, corporations are also required to pay a $50 filing fee for their annual reports. This fee is a small but essential part of maintaining compliance with Delaware’s corporate regulations.

They may decide to start with a minimum stock structure subledger vs general ledger which is 1 to 5,000 shares of stock. With this stock structure, the Delaware Corporation will pay a $225 Delaware Franchise Tax each year which includes the annual report fee. This will allow for the lowest annual fees which is sometimes beneficial for bootstrapped start-up companies.

How to Calculate Franchise Taxes

We provide small businesses with a tax filing and bookkeeping solution. Our all-star team does your monthly bookkeeping for you and sends your financials to trusted tax professionals for a stress free filing experience. Delaware Franchise Tax is based on a Corporation’s total Authorized Shares. When clients are thinking about forming Delaware Corporations, one of the most important decisions to make is how many total Authorized Shares of Stock the Corporation will have along with the Par Value of the Shares.

Harvard Business Services, Inc. guarantees your annual Delaware Registered Agent Fee will remain fixed at $50 per company, per year, for the life of your company.

Roughly, if you’ve raised $500k to $1M in venture funding, you are likely to owe between $500 to $1,000. If you’ve raised $10M in VC funding, you are going to owe closer to $4,000. If you’ve received a bill for $75K, it is because Delaware has calculated the tax using the Authorized Shares Method. Don’t freak out; recalculate using the Assumed Par Value Capital Method.