Delaware Franchise Tax Calculator

We created a free Delaware Franchise Tax Calculator just for you.
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Plus, we are here to guide you through figuring out and planning your Delaware Franchise Tax, making sure you know exactly what to expect for your Delaware business.

No of authorized shares
Total number of share that your company has
Par value
Stock par value
No of issued shares
Total number of shares you have issued to shareholders
Total gross assets
Total gross assets shall be those "total assets" reported on the U.S. Form 1120, Schedule L (Federal Return) relative to the company's fiscal year ending the calendar year of the report
Total gross assets of your company
Number of issued shares should not be greater than the amount of authorized shares
Estimated Tax using the Assumed Par Value Method:
Estimated Tax using Authorized Shares Method:
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This tax is payable for 2022 whether you think you were loss-making or not

How Do You Figure Out Franchise Tax in Delaware?

Delaware has a couple of ways to work out your franchise tax, thanks to the Division of Corporations. The first way is to look at how many shares your company has out there. For startups with VC backing and lots of option pools, this method might mean a pretty hefty tax bill.

The second way, known as the "assumed par value" method, gets a bit more into the weeds, calculating based on the shares you've actually issued and what your company's assets are worth. This route often ends up being kinder to the wallets of VC-backed startups.

Let's Simplify How Delaware Franchise Tax Works

Think of Delaware's franchise tax as having two main paths: the "Authorised Shares Method" and the "Assumed Par Value Capital Method." Here's the lowdown on both, in plain English.

The Straight-Up Authorised Shares Method

So, you've got this startup.ย 

It's buzzing with potential, and you've managed to secure some serious backing, meaning you've got a ton of shares authorised. Let's break it down with the Authorized Shares Method but with a twist on the numbers:

  • Up to 5,000 shares, Delaware says, "That'll be $175, please."
  • Jump to 5,001 to 10,000 shares, and now you're looking at $250.
  • Every leap over that by another 10,000 shares (or any part thereof) tacks on an additional $85.

Now, let's picture your startup as more modest but still substantial, with 1,000,000 shares authorised.

A Hypothetical Spin on the Authorised Shares Method

For the first 10,000 shares, you're dishing out $250. But what about the rest? You've got 990,000 shares that need accounting for. That's an extra 99 chunks of 10,000 shares, each chunk costing you $85.

So, if we do a quick bit of math:

For those 1,000,000 shares, your startup's looking at a franchise tax bill of $8,665. Not too shabby for a venture-backed company, right? Remember, these numbers are to get the gears turning on how Delaware's Authorized Shares Method can play out for different sizes of startups.

Breaking Down the Assumed Par Value Capital Method: A Friendlier Guide

Alright, let's dive into the Assumed Par Value Capital Method, which honestly sounds more like a math puzzle than a tax calculation. This method takes into account a bunch of things: how much your assets are worth, how many shares you've got out there, and the par value of those shares. The gist is you're paying $400 for every million dollars of your calculated par value, but getting to that number? Well, that's where the brain workout begins.

Here's a more down-to-earth walk-through:

Figuring Out Your "Assumed Par": Start by dividing your total gross assets by your total issued shares and take that number down to six decimal places. This magic number is your "assumed par value."

Dealing With Lower Par Value Shares: Now, take that assumed par value and multiply it by all your authorised shares that are actually set at a lower par value than your calculated one. In the world of well-set-up startups, this is probably going to cover almost all your shares.

Accounting for Higher Par Value Shares: If you've got any shares sitting at a higher par value than your assumed par, multiply those by their actual par value.

Add Everything Together: Combine the results from the second and third steps to get what's called your assumed par value capital.

Calculate Your Tax Owed: To figure out your tax, divide your assumed par value capital (round up to the nearest million if you're over $1,000,000) by 1,000,000 and multiply by $400.

The least amount you'll pay using this method is $400, and there's no cap on the maximum.

Let's run through an example with different numbers to keep things fresh:

Suppose your startup has $5,000,000 in gross assets and 500,000 issued shares.ย 

Your assumed par value comes out to... let's crunch those numbers:

So, with $5,000,000 in gross assets and 500,000 issued shares, your "assumed par value" works out to be $10 per share.

Now, imagine all your authorised shares have a par value of less than $10 (which is pretty standard for startups), and you're trying to calculate your franchise tax based on this method.

Without diving deeper into the more complex parts of steps 2 through 5 with specific numbers for each, remember this: the goal is to find out how much of your company's value is tied up in shares and then pay $400 for every million dollars of that value.

At the very least, you're looking at a $400 bill, but there's no ceiling on what that number could be if your company's valuation skyrockets.

This method is a bit of a journey, and while these steps give you a starting point, consulting with a tax professional who knows the ins and outs of Delaware corporations can save you a headache and potentially some money, too.ย 

This is just a friendly nudge to not go at it alone.

Start filing now!

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FAQs and Articles

What is the Delaware Franchise Tax Calculator, and how does it work?

Compliance

The Delaware Franchise Tax Calculator is a tool designed to help businesses estimate their franchise tax obligations to the state of Delaware. It typically works by inputting relevant financial information, such as the number of authorised shares and gross assets, and then calculating the expected tax amount based on Delaware's franchise tax regulations.

Is the Delaware Franchise Tax Calculator free to use?

Compliance

Delaware Franchise Tax Calculators are freely available online. However, it's essential to ensure you're using a reputable and accurate calculator provided by a trusted source, such as the Delaware Division of Corporations or reputable financial websites.

What information do I need to use the Delaware Franchise Tax Calculator?

Compliance

The specific information required may vary depending on the calculator, but typically, you'll need details such as the number of authorised shares, par value of shares, gross assets, and any additional factors relevant to Delaware's franchise tax calculation methods.

Can the Delaware Franchise Tax Calculator provide precise tax estimates?

Compliance

While the Delaware Franchise Tax Calculator can offer a reasonable estimate of your tax obligations, it's essential to remember that it may only account for some possible scenarios or nuances in Delaware's tax laws. For precise tax estimates, especially for complex business structures, it's advisable to consult with a tax professional familiar with Delaware tax regulations.

Are there any limitations to using the Delaware Franchise Tax Calculator?

Compliance

While the Delaware Franchise Tax Calculator can provide valuable insights into your potential tax liabilities, it may have limitations in accommodating unique business situations or changes in tax laws. Additionally, the calculator's accuracy depends on the inputted data. For comprehensive tax planning, using the calculator as a starting point and seeking professional advice when necessary is recommended.