Delaware Franchise Tax: How to Calculate and Pay

If you’ve just incorporated in Delaware, or you’re getting ready to file your annual report, this is the part that usually causes confusion: the actual franchise tax owed, and why the figure on Delaware’s website often looks much higher than what other founders end up paying. This article covers what the Delaware franchise tax is, the two ways to calculate it, and how to avoid overpaying.

What Is the Delaware Franchise Tax?

The Delaware franchise tax is an annual fee charged by the state for the right to be incorporated there. It has nothing to do with how much money your company made. Even a company with zero revenue, zero employees, and zero activity still owes this tax every year, simply for existing as a Delaware entity.

This applies to every domestic Delaware corporation, whether it’s a venture-backed C-Corp or a small holding company that hasn’t done anything yet. If your company is registered with the Delaware Division of Corporations, you owe this tax for as long as it stays registered.

LLCs and limited partnerships are a separate story, and a much simpler one. They pay a flat $300 per year, with no calculation involved at all.

Why Your First Tax Bill Looks So High

Here’s where most founders get scared of. Delaware automatically calculates your tax using the Authorized Shares Method and shows you that number first. This method only looks at how many shares your company is authorized to issue, regardless of how many shares are actually issued or how much the company is worth.

Startups tend to authorize a large number of shares (10,000,000 is a common number) to leave room for future hires, investors, and option pools. Under the Authorized Shares Method, a company with 10 million authorized shares can end up with a tax bill in the tens of thousands of dollars, even if the company has no real assets yet.

The important thing to know is that this is not the only method available to you, and in almost every early-stage case, it’s not the one you should use.

Two Ways to Calculate the Tax

Delaware allows corporations to calculate their franchise tax using either of two methods, and you are legally entitled to pay whichever one comes out lower.

Method 1: Authorized Shares Method

This is Delaware’s default. It is based purely on the number of shares authorized in your certificate of incorporation. Here’s the breakdown for 2026:

• 5,000 shares or fewer: $175 (minimum tax);
• 5,001 to 10,000 shares: $250;
• Each additional 10,000 shares (or part of it): add $85.

So a company authorized to issue 100,000 shares would owe $1,015 ($250 plus nine additional increments of $85). A company with 10,000,000 authorized shares would owe roughly $85,000 under this method, which is exactly the kind of number that sends founders into a panic.

Method 2: Assumed Par Value Capital Method

This method looks at your company’s actual financial picture rather than just the number on your certificate of incorporation. It factors in your total gross assets and the number of shares actually issued, not just authorized. The calculation has a few steps:

1. Divide total gross assets by total issued shares to get your “assumed par value.”
2. Multiply that assumed par value by your total authorized shares to get the “assumed par value capital.”
3. Divide the result by $1,000,000, round up to the next whole number, and multiply by $400.

For example, a company with $1,000,000 in gross assets, 485,000 issued shares, and a mix of authorized shares at different par values would land on an assumed par value capital of roughly $3.3 million. Divided by a million and rounded up, that’s 4, multiplied by $400, giving a tax of $1,600.

Compare that to a company with the same authorized share count using the Authorized Shares Method, and the difference can be the gap between a four-figure bill and a six-figure one. For most early-stage startups with millions of authorized shares but modest assets, this method produces a far smaller tax, often landing right at the $400 minimum.

One important detail: Delaware’s system defaults to the Authorized Shares Method and will not automatically switch to the Assumed Par Value Capital Method for you. You need to calculate both yourself (or have someone do it for you) and actively select the lower one when filing. If you need help, Skala can file your Delaware franchise tax for you — calculating both methods and filing under the lower one before the deadline. More details are available here.

Minimums and Maximums to Know

Whichever method you use, here’s what bounds the result:

• Minimum tax under the Authorized Shares Method: $175.
• Minimum tax under the Assumed Par Value Capital Method: $400.
• Maximum tax under either method: $200,000.
• Maximum tax for a “Large Corporate Filer” (a company listed on a national exchange with at least $750 million in revenue or assets, and at least $250 million in both): $250,000.

For nearly all startups and early-stage companies, the realistic range sits between $400 and a few thousand dollars, assuming the right method is chosen.

What Information You’ll Need

To run the calculation yourself, pull together:

• Total number of authorized shares (from your certificate of incorporation).
• Total number of issued shares, including treasury shares.
• Total gross assets as of December 31 of the relevant tax year, taken from Form 1120, Schedule L of your federal tax return.

Delaware also publishes a Delaware franchise tax calculator and a downloadable spreadsheet that can run both methods for you, which is worth using to double-check your numbers before filing.

When Is It Due, and How Do You Pay?

For corporations, the annual report (additional $50) and franchise tax payment are due by March 1 each year, covering the prior calendar year. So the deadline in March 2026 covers the 2025 tax year.

LLCs and limited partnerships pay their flat $300 fee by June 1 each year, with no annual report required.

Payment is made online through the Delaware Division of Corporations website. You’ll need your company’s file number, which appears on your certificate of incorporation, along with the figures mentioned above if you’re using the Assumed Par Value Capital Method.

If your franchise tax liability comes out to $5,000 or more, Delaware requires estimated quarterly payments instead of a single annual payment: 40% by June 1, 20% by September 1, 20% by December 1, and the remainder by March 1.

What Happens If You Miss the Deadline?

Missing the March 1 deadline triggers a flat $200 penalty plus 1.5% interest per month on whatever remains unpaid. Beyond the immediate cost, an unpaid franchise tax puts your company out of good standing with the state, which can complicate fundraising, banking, and other transactions down the line. Letting it go unpaid for an extended period can eventually lead to the administrative dissolution of the company.

How Skala Can Help

Skala can file your Delaware franchise tax for you — $399 for LLCs and $649 for C-Corps, state fee included — calculating both methods and filing under the lower one before the March 1 (C-Corp) or June 1 (LLC) deadline. Skala also keeps your Delaware company in good standing year-round: a registered agent, certificates of good standing and incumbency, and free annual meeting minutes for C-Corps.

You'll also find a library of free, lawyer-drafted legal templates — NDAs, contractor and employment agreements, SAFEs, and more — on the platform.