Last reviewed against the Delaware Division of Corporations' published rules.
How is Delaware franchise tax calculated?
Every corporation incorporated in Delaware files an Annual Franchise Tax Report and pays franchise tax each year. Title 8, Section 503 of the Delaware Code gives two ways to compute it, and the corporation pays whichever is lower:
- Authorized Shares method. 5,000 authorized shares or fewer: $175. 5,001 to 10,000 shares: $250. Each additional 10,000 shares, or portion of 10,000: add $85. Maximum $200,000.
- Assumed Par Value Capital (APVC) method. $400 per $1,000,000 of assumed par value capital, or portion of a million, with a $400 minimum and a $200,000 maximum. Below $1,000,000 the tax is proportional: assumed par value capital divided by $1,000,000, times $400.
On top of the tax, a non-exempt domestic corporation pays a $50 annual report filing fee. Listed companies that Delaware identifies as Large Corporate Filers pay a fixed $250,000 instead of the $200,000 maximum.
Why is the Authorized Shares bill so high for startups?
Because startup charters authorize a lot of shares, and the Authorized Shares method looks at nothing else. With 10,000,000 authorized shares, the first 10,000 cost $250 and the other 9,990,000 are 999 blocks of 10,000 at $85 each: $250 + $84,915 = $85,165.
Section 503(b) makes this the default. Unless the annual report states the number of shares actually issued and the corporation's total gross assets, Delaware bills the Authorized Shares method. The fix is not an appeal; it is two numbers on the report.
How does the Assumed Par Value Capital method work?
The Division of Corporations lays it out in four steps:
- Assumed par. Divide total gross assets by total issued shares (including treasury shares), carrying to 6 decimal places.
- Low-par classes. Multiply the assumed par by the number of authorized shares whose par value is less than the assumed par.
- High-par classes. For authorized shares whose par value is greater than the assumed par, multiply the number of shares by their own par value. This is the rule people miss: when the assumed par is lower than a class's stated par, Delaware uses the stated par for that class.
- Add steps 2 and 3. The total is your assumed par value capital. Round up to the next million if it is over $1,000,000, divide by 1,000,000, and multiply by $400.
Total gross assets means the "total assets" on federal Form 1120, Schedule L, for the fiscal year ending in the calendar year of the report. Delaware also notes that corporations with no-par stock always pay less under the Authorized Shares method.
Worked example: a seed-stage startup
These are the calculator's default inputs: 10,000,000 authorized shares of common at $0.00001 par, 8,000,000 shares issued, and $750,000 of total assets at year end.
| Step | Calculation | Result |
|---|---|---|
| Assumed par | $750,000 / 8,000,000 | $0.093750 |
| Assumed par value capital | 10,000,000 x $0.093750 | $937,500 |
| Tax (under $1M, proportional) | $937,500 / $1,000,000 x $400 | $375 |
| APVC minimum applies | $400 | |
| Authorized Shares method | $250 + 999 x $85 | $85,165 |
The company owes $400 plus the $50 filing fee, $450, instead of $85,165. After a priced round, say $6,000,000 of assets and 9,000,000 issued shares, the assumed par is $0.666667, assumed par value capital is $6,666,670, which rounds up to 7 million: 7 x $400 = $2,800. Still a fraction of the authorized-shares figure.
Delaware's own two-class example: 1,000,000 shares at $1.00 par and 250,000 at $5.00 par, $1,000,000 of assets and 485,000 issued shares. Assumed par is $2.061856, so the $1.00 class is valued at $2,061,856 and the $5.00 class at its own par, $1,250,000. The total, $3,311,856, rounds up to 4 million: $1,600.
When is Delaware franchise tax due?
The Annual Franchise Tax Report and the tax must be received by March 1 each year. Delaware sends notices to registered agents in December, and domestic corporations must file the report electronically.
- Late report: a $200 penalty if a completed report is not filed by March 1.
- Unpaid tax: interest of 1.5% per month on the balance.
- Estimated payments: corporations owing $5,000 or more pay 40% by June 1, 20% by September 1, 20% by December 1, and the remainder by March 1.
- A year unpaid: under Section 510, the charter becomes void until the corporation files a certificate of revival and pays every missed year.
Delaware LLCs and partnerships are different: no annual report, a flat $400 tax due June 1.
Common mistakes
- Paying the notice amount. The December notice is usually computed on authorized shares. File the report with issued shares and gross assets, and Delaware charges the lesser method.
- Leaving out a class. Include every authorized class, common and preferred. A preferred class with a higher par than the assumed par is valued at its own par.
- Using issued shares for a single class. The denominator is issued shares of all classes, including treasury shares.
- Guessing at gross assets. Use the same total assets figure that goes on Form 1120, Schedule L. If the books are not closed, the number is not final.
- Forgetting the fee. The tax is $400 at minimum under APVC, but the payment is $450 once the $50 report fee is added.
- Charter amendments mid-year. If you changed authorized shares or par value during the year, Delaware prorates the tax by the days each structure was in effect. This calculator does not; use the Division's own calculator for that case.
Frequently asked questions
Which Delaware franchise tax method should I use?
Delaware charges the lesser of the Authorized Shares method and the Assumed Par Value Capital method, but it can only compute the second one if your annual report includes your issued shares and total gross assets. Enter both every year. Most venture-backed startups with millions of authorized shares owe far less under the Assumed Par Value Capital method.
Why does my Delaware franchise tax notice show $85,165?
The notice is calculated on authorized shares only. With 10,000,000 authorized shares the Authorized Shares method is $250 for the first 10,000 shares plus $85 for each of the remaining 999 blocks of 10,000, which is $85,165. Filing the annual report with issued shares and gross assets lets Delaware apply the Assumed Par Value Capital method, often $400.
What counts as total gross assets for the Assumed Par Value Capital method?
Delaware uses the total assets reported on federal Form 1120, Schedule L, for the fiscal year ending in the calendar year of the report. Section 503(b) also requires goodwill to be included at its book value. For a calendar-year company filing the report due March 1, 2027, that is the December 31, 2026 balance sheet.
What is the minimum Delaware franchise tax?
The minimum is $175 under the Authorized Shares method (5,000 authorized shares or fewer) and $400 under the Assumed Par Value Capital method. The maximum under either method is $200,000, except for Large Corporate Filers, whose tax is fixed at $250,000. A domestic corporation also pays a $50 annual report filing fee.
When is Delaware franchise tax due and what happens if I am late?
The annual report and tax must be received by March 1. A report not filed by then incurs a $200 penalty, and unpaid tax accrues interest at 1.5% per month. Corporations owing $5,000 or more pay estimated installments of 40% by June 1, 20% by September 1, 20% by December 1, and the remainder by March 1. A corporation that neglects the tax or report for a year has its charter declared void.
Does the par value of my preferred stock change the calculation?
Yes. Classes whose stated par value is at or below the assumed par are multiplied by the assumed par. Classes whose par value is higher than the assumed par are multiplied by their own par value. Add a row for each class in the calculator above so both are included.
Sources
- Delaware Division of Corporations, How to Calculate Franchise Taxes
- Delaware Division of Corporations, Annual Report and Tax Information
- Delaware Code, Title 8, Chapter 5 (Sections 502, 503 and 510)
- Delaware Division of Corporations, Large Corporate Filer
This calculator and article are general information, not tax or legal advice. Confirm your figures with the Division of Corporations or a tax professional before filing.