It could be helpful to understand that there are multiple governmental entities that could tax the income of a Delaware corporation: (1) Federal Corporation Income taxes -- through the IRS; and (2) State Corporate Income/Franchise Taxes -- through the relevant State agency. (There may be other local taxes such as business license and sales taxes, but that is not relevant here to your franchise tax issue).
You are required to file separate tax returns each year to each entity (so you pay both federal and state taxes). (If you are from Canada, "states" are roughly equivalent to "provinces".)
Since you mentioned "franchise taxes", it looks like you are looking at the State of Delaware's taxes (and not the IRS).
In Delaware, franchise taxes can generally be calculated using two different methods: (1) Authorized Shares Method (number of shares you authorized); and (2) Assumed Par Value Capital Method (generally based on the value of the assets in your company). See https://corp.delaware.gov/frtaxcalc/.
Most startups have been told to authorize 10 million shares in their incorporation paperwork. In Delaware, if you select the calculation method based on the number of shares, and you authorized 10 million shares, you could be surprised by a very expensive "initial" franchise tax calculation.
Others have already linked to a good article discussing this "surprise" bill: https://www.cooleygo.com/so-you-owe-thousands-in-delaware-fr....
The solution is to look closely at your franchise tax bill and read about the option to calculate your taxes using the Assumed Par Value method.
If you cannot afford a lawyer, contact the State of Delaware Division of Corporations directly to discuss how to use the Assumed Par Value method to calculate your franchise taxes. See https://corp.delaware.gov/contact/ (the Franchise Tax contact number is (302) 739-3073 option 3).
Good luck.
You are required to file separate tax returns each year to each entity (so you pay both federal and state taxes). (If you are from Canada, "states" are roughly equivalent to "provinces".)
Since you mentioned "franchise taxes", it looks like you are looking at the State of Delaware's taxes (and not the IRS).
In Delaware, franchise taxes can generally be calculated using two different methods: (1) Authorized Shares Method (number of shares you authorized); and (2) Assumed Par Value Capital Method (generally based on the value of the assets in your company). See https://corp.delaware.gov/frtaxcalc/.
Most startups have been told to authorize 10 million shares in their incorporation paperwork. In Delaware, if you select the calculation method based on the number of shares, and you authorized 10 million shares, you could be surprised by a very expensive "initial" franchise tax calculation.
Others have already linked to a good article discussing this "surprise" bill: https://www.cooleygo.com/so-you-owe-thousands-in-delaware-fr....
The solution is to look closely at your franchise tax bill and read about the option to calculate your taxes using the Assumed Par Value method.
If you cannot afford a lawyer, contact the State of Delaware Division of Corporations directly to discuss how to use the Assumed Par Value method to calculate your franchise taxes. See https://corp.delaware.gov/contact/ (the Franchise Tax contact number is (302) 739-3073 option 3).
Good luck.