# What is the Assumed Par Value franchise tax calculation method for startups?

For a high-growth startup intending to distribute equity to co-founders, employees, and investors, it’s good practice to have a lot of shares so you can make precise divisions of ownership over multiple rounds of financing. For that reason, Gust Launch incorporates you with 10,000,000 authorized shares.

Delaware’s standard method of franchise tax calculation assesses value through the Authorized Shares Method, which is simply a formula that assesses tax by the number of authorized shares in your company. For a 10,000,000 share startup, this will be a five-digit tax bill.

An accepted, alternate way to calculate your taxes is the Assumed Par Value Capital Method, which is based on the actual value of your startup. If you’ve just incorporated, the actual value of your startup may be low, which would result in a lower tax obligation. It's important to note that the minimum franchise tax payment is \$450.

To calculate your franchise tax with this method, you’ll need three numbers:

1. Your startup’s gross assets, which you can learn from your bookkeepers if you don’t know off-hand
2. Your startup’s total authorized shares, which for Gust Launch users will be 10 million
3. Your startup’s total issued shares, which are the shares which you have already distributed

The first step is to divide your gross assets by the number of issued shares. This will give you an assumed par—the amount that a share costs, based on how much your company is worth.

Next, multiply your assumed par value by the number of authorized shares. This number will tell you the assumed par capital—more or less, this means “what your company is worth” to the state of Delaware.

Now, to calculate the amount you will pay as a franchise tax, divide your assumed par capital by 1,000,000 and multiply the result by \$450. This method assesses \$450 in tax burden for every million dollars of capitalization your company has, so for most founders paying taxes in their first year, the result will be a number less than \$450. Since \$450 is the minimum franchise tax burden in Delaware, most startups will likely pay \$450 in franchise tax in their first year.

For more information on Delaware's franchise tax, please click here.