01
The challenge
The founders believed they owed one federal return and a Delaware fee. They had not checked whether working from California created nexus, whether any shareholder's status triggered foreign-ownership reporting, or what documentation they needed for payments to offshore contractors. Penalties on some of these forms start before any tax is due.
02
Our approach
- Documents first. Certificate of incorporation, SS-4, cap table and contractor list were reviewed against federal and state requirements.
- Delaware franchise tax. We recalculated the tax under the assumed par value capital method, which is often far lower than the authorized shares default.
- California nexus. Founder activity in California was tested against the state's doing-business rules and its $800 minimum franchise tax.
- Foreign elements. Shareholder status was mapped against Form 5472 rules, and Form W-8BEN collection was set up to support no US withholding on services performed abroad.
- Prioritized calendar. Every item received a deadline, a penalty note and an owner.
03
Results delivered
- A compliance report listing every federal and state obligation, ranked by penalty risk.
- Delaware franchise tax computed on the lower assumed par value basis.
- Contractor documentation in place for offshore payments.
- A 12-month filing calendar for the founders.
04
Frequently asked questions
Delaware allows the authorized shares method or the assumed par value capital method. Startups with many authorized shares usually owe far less under the assumed par value method.
It can. A company doing business in California, including through founders working there, generally owes at least the $800 minimum franchise tax.
No. Collect Form W-8BEN instead. Payments for services performed entirely outside the US are generally not subject to US withholding or 1099 reporting.
Related services
Key terms See the glossary →
