Delaware Taxes

All of my startups were incorporated in Delaware. The initial reasoning might have been that there is no income tax in the state, but there is franchise taxes in the state. But I don’t think that reasoning holds much value, because even if you don’t have to pay income taxes in Delaware if your head office is located in another state, like my companies that have been in California, you still have to file state income taxes in that state!

I feel the reason for incorporation in Delaware is its strong court system, their laws and policies that are favorable to companies. The Delaware Court of Chancery allows companies to resolve disputes quickly with a judge rather than a jury. Judges in the court specialize in corporate law and hear only business related cases.

So coming to franchise taxes. The state gives companies two methods for calculating the taxes: the assumed par value method or authorized shares method. To read more you can check out the link

I have attached a file showing how the calculations under the two methods work. Below is a file I created to calculate the taxes, hope it helps you estimate your taxes.