What is Delaware franchise tax? Definition, Formula & Benchmarks

What is delaware franchise tax?

Delaware franchise tax is an annual tax on Delaware C-corps, due March 1, calculated two ways: the Authorized Shares Method (minimum $175) and the Assumed Par Value Capital Method (minimum $400). Startups with many authorized shares are often billed a huge default amount but can recalculate to the far lower figure, plus a $50 annual report fee.

Formula

Assumed Par Value tax = (Assumed par value capital ÷ $1,000,000) × $400

Assumed par value capitalTotal gross assets ÷ issued shares × authorized shares, tying tax to real capital rather than share count
$400Rate per $1M of assumed par value capital (min $400 under this method)
$175Minimum tax under the Authorized Shares Method

Worked example

A startup authorizes 10,000,000 shares, issues 2,000,000, and holds $500,000 in gross assets. The default Authorized Shares Method bills roughly $85,000. Recalculating under the Assumed Par Value method, tax drops to the $400 minimum. With the $50 report fee, the company owes $450 instead of ~$85,000, the same corporation, one method choice.

Benchmarks by stage

Minimum tax is $175 (Authorized Shares Method) or $400 (Assumed Par Value Capital Method), maximum $200,000 ($250,000 for Large Corporate Filers), plus a $50 annual report fee. Corporations may use whichever method yields the lower tax, due on or before March 1.

Source: Delaware Division of Corporations (2026)

Why it matters for fast-growing companies

Delaware auto-bills using the Authorized Shares Method, which produces alarming five-figure amounts for startups that authorize millions of shares, even pre-revenue ones. Because you may legally use whichever method is lower, recalculating under the Assumed Par Value method typically cuts the bill to a few hundred dollars. Most overpayment comes from simply not switching methods.

Frequently asked questions

Why is my Delaware franchise tax bill so high?+

Delaware defaults to the Authorized Shares Method, which taxes based purely on how many shares you authorized. Startups often authorize 10 million or more, producing bills of tens of thousands of dollars. You can instead use the Assumed Par Value Capital Method, which ties tax to actual assets and usually yields a far lower amount.

When is Delaware franchise tax due?+

For domestic corporations, the annual report and franchise tax are due on or before March 1 each year and must be filed online. Corporations owing $5,000 or more must make estimated quarterly payments. Missing the deadline triggers a $200 penalty plus monthly interest on the unpaid balance.

Which calculation method should my startup use?+

Delaware lets you pay under whichever method produces the lower tax. For most early-stage startups with many authorized shares but modest assets, the Assumed Par Value Capital Method is dramatically cheaper, often the $400 minimum versus tens of thousands under the Authorized Shares default. Always calculate both before paying.

Delaware franchise tax