Delaware APV optimization, worked

Formula

1. Assumed par = gross assets (Form 1120, Schedule L) ÷ issued shares
2. Capital = assumed par × authorized shares
3. Tax = $400 per $1M of capital ($400 min, $200,000 max), + $50 report fee

Worked example

10M authorized, 1M issued, $1M assets → assumed par $1.00 → capital $10M → $4,000 + $50. Under Authorized Shares the same charter bills $85,000+. Startups with 10M authorized and modest balance sheets almost always win on APV.

When each method wins

Few shares (≤10k) → Authorized Shares ($175–$250) usually wins. Many shares + low assets → APV wins. Compute both every year before March 1; late adds $200 + 1.5%/month.

Same charter, different balance sheets

Under Authorized Shares, every row bills $85,165. Tax is $400 for each $1,000,000 of APV capital or part of one, so $2.5M counts as three units. Add the $50 annual report fee to each.

What you need, and where it comes from

• Total gross assets as of the end of the tax year: the total-assets figure on Form 1120, Schedule L (or your year-end balance sheet if the return isn't done). Gross, not net: don't subtract liabilities.
• Issued shares of all classes, including preferred, at year-end.
• Authorized shares and par value from your certificate of incorporation as amended.

Two rules trip people up. First, if the assumed par comes out lower than a class's stated par, Delaware uses the stated par for that class. Second, companies with several classes at different par values compute each class separately: the calculator handles the common single-par case.

How to actually pay the APV amount

1. Ignore the Authorized Shares figure on the notice Delaware sends in January: it's a default, not an assessment.
2. Log in to the Division of Corporations' annual report system with your file number.
3. Enter gross assets and issued shares in the annual report; the system recalculates under APV and shows the lower amount.
4. Pay that amount plus the $50 report fee by March 1. Keep a PDF of the Schedule L or balance sheet you used.

If you already paid the higher Authorized Shares figure, you can file an amended annual report with gross assets and issued shares and ask the Division for a refund of the difference.

Mistakes that cost real money

• Paying the notice amount. The most common and most expensive error: tens of thousands for companies that owe $400.
• Leaving gross assets blank. Without it, the system can't compute APV and falls back to Authorized Shares.
• Authorizing far more shares than needed. APV scales with authorized shares, so a large authorized-but-unissued pool raises the APV bill as assets grow.
• Missing estimated payments. Corporations owing $5,000 or more pay 40% by June 1, 20% by September 1, 20% by December 1, and the rest by March 1.

Starting a company? The Delaware C-corp guide covers choosing share counts with this in mind.