# The two methods, worked line by line

> Both methods on Northwind's charter, line by line: $85,165 and $400.

Source: https://lopifi.com/learn/delaware-franchise-tax-calculation/two-methods-worked
Part of: Lopifi — US GAAP books on autopilot, checked by a CPA (https://lopifi.com)

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**How do I calculate Delaware franchise tax with the assumed par value capital method?** Both methods on Northwind's charter, line by line: $85,165 and $400.

Northwind's charter: 10,000,000 authorized shares at $0.00001 par, 8,000,000 issued to the founders, and $74,292.60 of total assets at September 30, used here in place of the year-end Schedule L figure.

## Method one: authorized shares

The [authorized shares method](https://lopifi.com/md/glossary/authorized-shares-method) counts the shares the charter *permits*, the [authorized shares](https://lopifi.com/md/glossary/authorized-shares), not the ones anyone holds. $175 for up to 5,000 shares, $250 for up to 10,000, and $85 for every further 10,000 or part of 10,000. This is the figure on the notice Delaware sends.

| Step | Working | Tax |
| --- | --- | --- |
| First 10,000 shares | The 5,001–10,000 tier | 250 |
| Every further 10,000 or part | 9,990,000 shares = 999 blocks × $85 | 84,915 |
| Authorized shares tax |  | 85,165 |

Northwind, authorized shares method.

## Method two: assumed par value capital

The [assumed par value capital method](https://lopifi.com/md/glossary/assumed-par-value-capital-method) starts from the balance sheet. Divide total gross assets by issued shares to get an "assumed par". Shares whose real par is below it count at the assumed par. Tax that capital at $400 per $1,000,000, with a $400 minimum. Gross assets are the total assets on the federal return's [balance sheet](https://lopifi.com/md/glossary/balance-sheet), Schedule L of [Form 1120](https://lopifi.com/md/glossary/form-1120), which is one reason the franchise tax waits on the closed year.

> “Total Gross Assets shall be those “total assets” reported on the U.S. Form 1120, Schedule L (Federal Return)”

— [Delaware Division of Corporations — How to Calculate Franchise Taxes](https://corp.delaware.gov/frtaxcalc/), The authorized shares method and the assumed par value capital method, step by step

| Step | Working | Result |
| --- | --- | --- |
| 1. Assumed par | $74,292.60 gross assets ÷ 8,000,000 issued shares | $0.009287 |
| 2. Assumed par value capital | Par of $0.00001 is below $0.009287, so 10,000,000 authorized shares × $0.009287 | 92,870 |
| 3. Tax at $400 per million | 92,870 ÷ 1,000,000 × $400 | 37.15 |
| 4. Minimum | Below the $400 minimum | 400 |

Northwind, assumed par value capital method.

## Where this page's rules come from

- [Delaware Division of Corporations — How to Calculate Franchise Taxes](https://corp.delaware.gov/frtaxcalc/) — The authorized shares method and the assumed par value capital method, step by step (state)
- [8 Del. C. §§501–510](https://delcode.delaware.gov/title8/c005/index.html) — Delaware franchise tax — the annual report (§502), the rates (§503), proration (§503(d)), a void charter (§510) (state)

## Read further

- https://lopifi.com/md/accounting/delaware-franchise-tax

- **Track:** [Compliance & tax](https://lopifi.com/md/learn/compliance)
- **Part of:** [Delaware franchise tax, worked both ways](https://lopifi.com/md/learn/delaware-franchise-tax-calculation) — 6 min
- **Terms taught:** [Authorized shares method](https://lopifi.com/md/glossary/authorized-shares-method), [Assumed par value capital method](https://lopifi.com/md/glossary/assumed-par-value-capital-method), [Authorized shares](https://lopifi.com/md/glossary/authorized-shares)
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