Delaware Franchise Tax Calculator

If you incorporated in Delaware, yes, you need to file and pay the Delaware Franchise Tax. Most VC backed startups are Delaware C-Corps, which means that most VC-backed startups DO need to file.

Do it online, on the the Delaware Division of Corporation’s site: https://corp.delaware.gov/paytaxes.shtml

Do it online, on the the Delaware Division of Corporation’s site: https://corp.delaware.gov/paytaxes.shtml

Most of our startups pay between $400 - $10,000 in DE Franchise taxes. Roughly, if you’ve raised $500k to $1M in venture funding, you are likely to owe between $500 to $1,000. If you’ve raised $10M in VC funding, you are going to owe closer to $4,000. If you’ve received a bill for $75K, it is because Delaware has calculated the tax using the Authorized Shares Method. Don’t freak out; recalculate using the Assumed Par Value Capital Method.

We often get the question, “why should my startup consider incorporating out-of-state and become a Delaware C-corp?”. Here are a few reasons why you would want to initially incorporate in Delaware.

Reasons Venture Capitalists Want Delaware C-Corps:

• A C-Corp structure retains the profits and losses at the C-Corp level. It is not a pass-through entity like LLCs or S-Corps where the profits or losses get passed through to investors, C-Corps C-Corps are friendly with the venture capitalists’ tax structure.
• There is a ton of litigation and VCs tend to understand what the rules are in Delaware
• Most importantly, venture capitalists would usually rather fund a Delaware C-Corp and will tell you to switch as soon as they invest in your company.

There are many things you must do after becoming a Delaware C-Corp. Click here to learn more.

Becoming a Delaware C-Corp is simple, but there is a lot of legwork. Our experts here at Kruze are happy to do it for you. Also at Kruze, another option is working with a PEO; that is how you “Incorporate in a state.” Hope that helps, thanks.

It’s important for founders to remember that the Delaware Franchise Tax website defaults to the largest tax bill possible when you first log into the site. That’s because the state of Delaware doen’t know how many outstanding shares you have or what your asset base is until you fill out that information. If you’re not working with an accounting firm, you’ll need to total up your asset base and enter that number. Then you need to hit the “recalculate” button and wait while the system generates a new balance. The new number will very likely be lower than the original number you saw.