I got a $50k franchise tax bill but only had to pay $450. Here is how I saved $50k on taxes.

Received a Delaware franchise tax bill for your startup that seems too high? 

Don’t panic. Delaware typically uses a calculation method that results in higher taxes.

It’s called the “Authorized Share Method” and here is how it works: 

Franchise taxes are calculated based on the number of shares authorized in your charter. For example, a company with 10,000,000 shares might owe $85,165.

Alternatively, you can calculate taxes using the “Assumed Par Value Method”. You divide the company's gross assets by its issued and outstanding shares. Use the figures from the U.S. Form 1120, Schedule L, or a recent balance sheet.

Most startups benefit from using the Assumed Par Value method, which ties tax to total assets. Just ensure that your issued shares are at least one-third to half of your authorized shares to avoid high taxes. This method usually works best for startups.

Find our FREE Delaware franchise tax calculator here.