Did you incorporate in Delaware and get surprised by the minimum annual franchise tax this year?


Looks like the DE Franchise Tax Board & SecState changed the minimum authorized shares tax - a lot of companies that incorporated this past year may have been unaware of this change or not sure how to deal with this change if they had already declared their authorized shares. Just curious - did you inadvertently wind up owing Delaware over $10,000 in minimum franchise tax (not income determined) this year?

If enough companies have, there may be sufficient basis to petition for amnesty/tax amendment.

Incorporation Tax Delaware

asked Apr 14 '11 at 08:44
Henry The Hengineer
4,316 points

3 Answers


Delaware has two ways of computing the annual franchise fee - as long as you have par-value shares. The state uses the more expensive method in its statement to the company, which can choose the alternative method (again, if it avoided the no-par-value trap).

This issue comes up frequently and is discussed in "In Delaware, No-Par-Value Can Cost a Bundle".

Disclaimer: This information does not constitute legal advice and does not establish an attorney-client relationship.

answered Apr 14 '11 at 10:20
Dana Shultz
6,015 points


I believe you can switch to income based, then. If you don't generate profits, your tax should be quite low ($400 maybe).

answered Apr 14 '11 at 09:02
Alain Raynaud
10,927 points


Assuming you applied a Par Value to your shares when you incorporated, there are two ways to calculate Delaware Franchise Tax. It is often the case that the "Assumed Par Value" method results in the lowest franchise tax calculation.

Unfortunately, the State of Delaware does not have the data necessary to calculate your tax using the "Assumed Par Value" method, so they end up defaulting to the "Authorized Shares Method".

It is relatively easy to calculate the "Assumed Par Value" Method. We did an article on this at www.capgenius.com and will include a link to it below. The article includes an example of how to calculate both methods and step-by-step instructions. We have received multiple comments from companies who saved tons of money by using the alternative method, so check it out and we hope it helps!

If you do not have Par Value assigned, read the article that Dana links to as it is directly relevant to that situation.

http://capgenius.com/2011/03/02/de-franchise-tax/ Hope it helps. Please ping us with any follow-up questions either here or on twitter (@capgenius).

answered May 12 '11 at 14:03
Jim Smith
81 points

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Incorporation Tax Delaware