Also known as DE franchise tax, Delaware annual 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).
Key takeaways
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
A startup authorizes 10,000,000 shares, issues 2,000,000, and holds $500,000 in gross assets. The default Authorized Shares Method bills $85,165. Under the Assumed Par Value method, assumed par is $0.25 ($500,000 ÷ 2,000,000), assumed par value capital is $2,500,000, which rounds up to $3,000,000 and taxes at 3 × $400 = $1,200. With the $50 report fee the company owes $1,250 instead of $85,215 — the same corporation, one method choice.
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)
Delaware offers every domestic corporation two ways to compute the same tax, and lets you pay under whichever produces the lower figure. The state's own notice quotes the Authorized Shares Method, which is why the envelope is alarming. Nothing obliges you to pay that number.
| Authorized Shares Method | Assumed Par Value Capital Method | |
|---|---|---|
| What it taxes | The number of shares you authorized | Gross assets, via a per-share assumed par value |
| Minimum | $175 | $400 |
| Maximum | $200,000 | $200,000 |
| Inputs needed | Authorized shares only | Authorized shares, issued shares, total gross assets, stated par values |
| Typical startup result | Tens of thousands of dollars | The $400 minimum |
| Who it suits | Companies with few authorized shares | Companies that authorized millions of shares against modest assets |
The asymmetry is the whole point. Authorizing 10,000,000 shares costs nothing at incorporation and is standard practice for a venture-backed company, but it is the single input the default method taxes. Meanwhile a pre-revenue startup's gross assets are small, which is the input the second method taxes. Both figures describe the same corporation.
A $250,000 ceiling exists, but not for you
Delaware caps the tax at $200,000, raised to $250,000 for a Large Corporate Filer — a status reserved for exchange-listed companies reporting hundreds of millions of dollars in both revenue and assets. If you are reading this because of a startup bill, neither ceiling is in play.
The bracket table is fixed and takes one input. Find your authorized share count and read across.
| Authorized shares | Tax |
|---|---|
| 5,000 or fewer | $175 (the minimum) |
| 5,001 – 10,000 | $250 |
| Each additional 10,000 shares, or part thereof | Add $85 |
| Ceiling | $200,000 |
A startup has authorized 10,000,000 shares. Start at $250 for the first 10,000. The remaining 9,990,000 shares divide into 999 blocks of 10,000, each adding $85, which is $84,915. Total: $85,165, plus the $50 annual report fee.
That is the number on the notice, and it is correctly calculated. It is also the wrong number to pay, because the same corporation is entitled to the second method.
This method ties the tax to real capital rather than a share count. It takes four inputs — authorized shares, issued shares, total gross assets, and the stated par value of each class — and runs in five steps.
A corporation has 1,000,000 authorized shares at $1.00 par and 250,000 authorized shares at $5.00 par. It has issued 485,000 shares and holds $1,000,000 in total gross assets.
Take the company from the example above the fold: 10,000,000 shares authorized, 2,000,000 issued, $500,000 in gross assets, all one class at $0.00001 par. Assumed par value is $500,000 ÷ 2,000,000 = $0.25. Since the stated par ($0.00001) is below that, use $0.25 × 10,000,000 = $2,500,000 of assumed par value capital. Rounded up to $3,000,000, that is 3 × $400 = $1,200.
Note how sensitive this is to gross assets. Drop the same company to $150,000 of gross assets and the assumed par value falls to $0.075, capital to $750,000, and the tax to the $400 minimum. Raise a Series A and hold $8,000,000 instead, and assumed par value capital is $40,000,000 and the tax is $16,000 — still well under the $85,165 Authorized Shares figure, which only becomes the cheaper of the two once gross assets pass roughly $42 million. Recalculate both every year rather than assuming last year's answer holds; the Delaware franchise tax calculator runs both against your own numbers.
Issued shares are not outstanding shares
Use issued shares, which include treasury stock. Using outstanding shares instead inflates the assumed par value and therefore the tax. This is the most common arithmetic error in a self-filed Delaware return, and it moves the answer in the state's favour, so nobody catches it for you.
The penalty is rarely the real cost. A lapse in good standing is, because it surfaces during diligence at exactly the wrong moment: a certificate of good standing is a standard closing condition in a financing, and Delaware will not issue one while the franchise tax is unpaid. A $200 penalty can hold up a term sheet.
One structural point worth raising before next year rather than next March: if your authorized share count is far beyond what your cap table needs, reducing it by amendment lowers the default bill permanently. That is a board and stockholder decision with its own cost, so it is worth doing only when the gap is large and the company is stable. For most startups, recalculating correctly each year is the whole answer.
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 usually cuts the bill from tens of thousands to somewhere between the $400 minimum and a low four figures. Most overpayment comes from simply not switching methods.