Legal Question in Business Law in Delaware

I intend to form a Delaware Corp.. authorize 10.000.000 shares with a par value of 0.0001, but issue only 6.000.000 of those shares. I'm having difficulty determining what my franchise tax will be. The state of Delaware has a tax calculator on its site, but to make the calculation it requires also the "total gross assets" of the company. Since I'm only forming the company, I don't have any revenue yet so I don't really know what my total gross assets are. How do I determine that? Can I just pick a number that feels right? What if I pick zero? I don't want to end up paying a ridiculously high franchise tax.


Asked on 10/11/16, 6:25 am

1 Answer from Attorneys

The assumed par value method works from assets, not revenue. The franchise tax will be due on March 1 so you will calculate at that point. Since you are just starting out, you may not have much in the way of assets. Assume hypothetically $10,000 in assets (startup capital) or even $100,000 in assets (some early business success). Putting either amount of assets in the Del. Division of Corporations Franchise Tax Calculator worksheet (https://corp.delaware.gov/taxcalc.shtml), along with your numbers on authorized and issued shares, yields the same minimum franchise tax of $350.00.

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Answered on 10/11/16, 7:35 am


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