Our intuitive software automates the busywork with powerful tools and features designed to help you simplify your financial management and make informed business decisions. This agreement outlines the terms and conditions under which shares are sold and purchased. The par value of the preferred shares being transacted is usually specified here, along with other particulars like the issue price, number of shares, and payment terms.

Form 1120, Schedule L (Federal Return) relative to the company’s fiscal year ending the calendar year of the report. The tax rate under this method is $400.00 per million or portion of a million. If the assumed par value capital is less than $1,000,000, the tax is calculated by dividing the assumed par value capital by $1,000,000 then multiplying that result by $400.00.

Let’s also imagine it has authorized and issued 100,000 shares at a par value of $2.00 each, and 100,000 shares at par value of $10.00 each. Let’s also assume the number of shares issued and authorized is the same for simplicity’s sake. This method is a bit more complicated, because it involves calculating your business’s assumed par value—i.e.

How to Calculate Franchise Taxes

If you’ve authorized 5,001 to 10,000 shares, your franchise tax is $250. A franchise tax, sometimes called a privilege tax, is a fee you pay for the privilege of doing business in a certain state. Each year the State of Delaware calculates your corporation’s franchise tax obligation based on the Authorized Share Method. For these reasons, more than a million businesses are incorporated in Delaware, including more than half of all publicly traded and Fortune 500 companies. Notification of Annual Report and Franchise Taxes due are sent to all Delaware Registered Agents in December of each year.

The Straight-Up Authorised Shares Method

Book a demo today to see what running your business is like with Bench. Not sure where to start or which accounting service fits your needs? Our team is ready to learn about your business and guide you to the right solution.

You must file your annual report if your business is a corporation and pay your franchise tax and filing fee by March 1. All LLCs, Limited Partnerships, and General Partnerships formed in Delaware are required to pay the annual franchise tax by June 1. All Delaware-incorporated businesses must, however, still pay the annual franchise tax, submit an annual report, and pay a filing fee.

Assumed Par Value Capital Method

1. Just want to highlight that Justin Damiani is one of the BEST customer support reps I have ever interfaced with.
2. Don’t freak out; recalculate using the Assumed Par Value Capital Method.
3. For every additional 10,000 shares authorized after that, you pay another $85 in franchise tax, up to a maximum of $200,000.
4. The new number will very likely be lower than the original number you saw.
5. LLC/LP’s benefit by only having to pay a $300 flat fee for Franchise Tax (not including any filing fees from a Registered Agent).

Franchise Taxes and annual Reports are due no later than March 1st of each year. Help us have a coefficient definition types and examples video and lesson transcript productive first consultation by providing some additional information. We set startups up for fundrising success, and know how to work with the top VCs.

What other taxes do Delaware corporations need to file/pay?

Here’s how to figure out how much you need to pay, how to file, and what happens if you don’t. Franchise and corporate taxes are not the same thing, and most DE C-Corps that we advise do not have to file for corporate taxes in the state. All Delaware C-Corps are required to file a federal income tax return on Form 1120, even if they have incurred losses. This filing is typically due on April 15th and can be extended until October 15th. In addition to these taxes, Delaware C-Corps may also have to deal with other taxes such as income tax, gross receipts tax, payroll tax, sales tax, SaaS tax, property tax, and foreign tax.

If you incorporated in Delaware, yes, you need to file and pay the Delaware Franchise Tax. Most VC backed startups are Delaware C-Corps, which means that most VC-backed startups DO need to file. The minimum payment using the Assumed Par Value Capital method is $400, and there is no maximum. The franchise tax rate is $400 per million or portion of a million. LLC/LP’s benefit by only having to pay a $300 flat fee for Franchise Tax (not including any filing fees from a Registered Agent).