Compare the Authorized Shares Method against the Assumed Par Value Capital Method, and see why two blank fields turn a $400 bill into $85,165
Delaware's annual report defaults to the Authorized Shares Method whenever Total Issued Shares and Gross Assets are left empty. On 10,000,000 authorized shares that default produces a franchise tax of $85,165. Completing the same two fields and clicking Recalculate Tax moves the report to the Assumed Par Value Capital Method, and on the illustrative figures below the tax comes to $2,000. The walkthrough below replays it step by step on a recreation of the actual eCorp screen, including the amended-report trap that catches companies a second time.
The screen above is an educational recreation of the Delaware Division of Corporations eCorp annual report form, prepared by Sergei Tokmakov, Esq. to show where the two fields sit. It is not the official site and nothing typed into it is submitted anywhere; file your report at corp.delaware.gov. The company, file number, and figures are fictional. This is general information, not tax or legal advice. Confirm your own share counts, gross assets, and dates with your CPA or registered agent. Source: 8 Del. C. § 503, Delaware Division of Corporations.
A report filed on the Authorized Shares Method can be amended, and the overpayment is often recoverable. I handle this same correction every year, because the form defaults to the expensive method and gives no warning that it has done so. Send me your annual report, cap table, and year-end total assets, and I will tell you which method your filing used, what the corrected figure should be, and whether an amendment is worth filing.
Sergei Tokmakov, Esq. · California Bar #279869 · Informational content, not legal advice.