Delaware Franchise Tax: How it's calculated (assumed-par-value method)

Delaware charges C-corporations an annual franchise tax based on your shares, not your revenue. Many founders are surprised by a large initial bill – usually because Delaware defaults to the method that produces the higher number. There are two methods that they can use. The first is called the Authorized Shares Method. This method is based on issued shares and gross assets. This can produce a very high figure for startups with millions of authorized shares. 

The other method is the Assumed Par Value Capital Method. This method is based on issued shares and gross assets; usually far lower for early-stage startups. Delaware bills are using the higher method by default, but you can recalculate using the assumed-par-value-method, which typically reduces the amount owned. The franchise tax and annual report are due each year.

PaperOS is not a law firm, and can only provide self-help services or enable collaboration with third-party service providers at your specific direction. Do not rely on any documents or information from Savvi without consulting an attorney. PaperOS may partner with or refer clients to licensed attorneys, but such referral does not constitute an attorney-client relationship until the attorney is officially engaged by the client.