taxes, accounting, business-structureA startup incorporated in DE has 10MM authorized shares and 100,000 issued shares. From the rules for calculating DE franchise tax (using assumed par value method), it seems like every $10,000 in gross assets will end up adding $350 to the franchise tax bill.
Is this correct? If so, what’s the best way to mitigate this? (e.g. deauthorize shares?)
I am not an accountant/attorney.
Hey I’m sorry if I’m providing this answer too late… but for DE franchise tax, I’ve seen a few colleagues get confused by the “Authorized Shares Method” for calculating owed taxes. So they look at the website, run the calculation in their head for 35,000,000 shares outstanding and freak out.
However, once you look deeper into this you will notice that there is an alternate method called the “Assumed Par Value Capital Method”. “$350 Per $1,000,000 Or Portion of Assumed Par Value Capital.” So if the calculator determines your total assumed par capital value is < $1M, you’re paying $350.
Here is a link to the “[taxcalc][1]” tool.
All content is licensed under CC BY-SA 3.0.