Why does my Delaware franchise tax notice say $85,000?
A bill-shock guide for founders who see an about $85,000 Delaware franchise tax notice and need to compare the official methods before paying.
Summary
Your Delaware franchise tax notice often starts with the Authorized Shares Method, which can produce an about $85,000 bill when a startup has around 10 million authorized shares. The Assumed Par Value Capital Method may calculate much lower if every stock class has par value and you have clean issued-share, treasury-share, par-value, and gross-asset records.
An about $85,000 notice is often an Authorized Shares estimate, not proof that Assumed Par Value is unavailable.
| Notice trigger | Authorized Shares MethodThe notice can start from authorized share count rather than cash in the bank. |
|---|---|
| 10,000,000 authorized | $85,165 tax$250 plus 999 additional 10,000-share blocks at $85 each, before the annual report fee and state-account adjustments. |
| Low-asset example | $400 minimum taxWith $50,000 gross assets, 8,000,000 issued shares, and $0.00001 par value, Assumed Par Value hits Delaware's minimum before the report fee. |
Why the notice can look shocking
Delaware's Authorized Shares Method starts with the number of shares the corporation is allowed to issue. A startup can authorize millions of shares for founders, employees, and future financing while having modest gross assets. The notice can therefore look disconnected from revenue or cash.
Example: 10 million authorized shares
Assume the corporation has 10,000,000 authorized common shares. Authorized Shares Method: $250 for 5,001 to 10,000 shares, then 999 additional 10,000-share blocks at $85 each. That is $85,165 of franchise tax before the annual report fee, credits, penalties, interest, or official account adjustments. Assumed Par Value example: if the same corporation has $50,000 of gross assets, 8,000,000 issued shares, no treasury shares, and $0.00001 par value, the assumed par value is $0.006250. The resulting assumed par value capital is $62,500, so Delaware's $400 Assumed Par minimum applies before the $50 non-exempt domestic annual report fee.
Authorized Shares vs Assumed Par Value
The Authorized Shares Method is driven by authorized share count. The Assumed Par Value Capital Method uses total gross assets, all issued shares including treasury shares, authorized shares, and par value. Delaware publishes both methods and says to use the method that results in the lesser tax, but the official portal and state account determine the final balance due.
Limits before relying on the lower method
Stop before using a simple calculator if any stock class has no par value, gross assets or issued shares are zero, the corporation is a Large Corporate Filer, stock or par value changed during the year, the Schedule L facts are consolidated without a standalone reconciliation, or the issue is dissolution, revival, void status, a notice dispute, or legal/tax advice.
What Delaware Franchise Desk prepares
Delaware Franchise Desk prepares a self-review method comparison, annual report checklist, and annual passport from the facts you enter. It does not file with Delaware, pay the state, receive state mail, act as registered agent, verify account standing, or guarantee a lower tax.
Common questions
Why does my Delaware franchise tax notice say $85,000?
It usually means the notice is using the Authorized Shares Method. A corporation with about 10 million authorized shares can produce a franchise tax around $85,000 under Delaware's authorized-share tiers before considering the Assumed Par Value Capital Method.
Can I use Assumed Par Value instead of paying the notice amount?
Delaware says to use the method that results in the lesser tax. Assumed Par Value can be lower, but only when the corporation has par-value stock and clean issued-share, treasury-share, par-value, and gross-asset facts.
What records do I need before comparing methods?
Collect authorized shares by class, par value by class, issued outstanding shares, treasury shares, and total gross assets from the relevant Form 1120 Schedule L context or a supported standalone balance sheet reconciliation.
Does a high notice mean Delaware made a mistake?
Not necessarily. It can be a normal Authorized Shares Method result for a corporation with many authorized shares. If the notice, sender, balance, or account status looks suspicious, use Delaware's official portal, your registered agent, or Delaware Franchise Tax directly.
Check if your corporation fits the calculator lane
Use the Delaware Franchise Desk checker before the wizard if you are trying to turn a high Authorized Shares notice into a clean method comparison.
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