Delaware franchise tax: $85,165 or $400, due March 1

Delaware franchise tax is an annual tax every Delaware corporation owes for the right to exist there, whether or not it has revenue, and the report and payment are due by March 1 for the prior year. Delaware computes it two ways, and a typical startup with 10,000,000 authorized shares owes $85,165 under the default method but $400 under the assumed par value capital method, so the method you file with is the whole question.

This guide walks through both methods with the Division of Corporations' own rules, a worked example before and after a seed round, and what to have ready before March 1. Figures are the rates the Division of Corporations published as of September 2026.

Who has to pay Delaware franchise tax

Every corporation incorporated in Delaware files an annual franchise tax report and pays the tax, unless it qualifies as an exempt (nonprofit) corporation. It does not matter where the company operates, whether it made money, or whether it has any revenue. The tax is a charge for the corporate charter, not a tax on income. A Delaware startup with employees in California owes California's $800 minimum franchise tax on top. A startup with no income tax to pay can still turn its federal research credit into cash, through the R&D credit's payroll offset.

The Division of Corporations says the tax is assessed if the corporation is active in its records at any time from January 1 to December 31 of the tax year (Division of Corporations). A startup incorporated in November still owes that year's tax the following March.

Two things founders often mix up:

• It is not based on revenue. Delaware looks at your authorized shares, and optionally your issued shares and total assets. Your revenue or ARR plays no part in the calculation.
• LLCs pay something else. Delaware LLCs, limited partnerships and general partnerships pay a flat annual tax due June 1 and file no annual report (Division of Corporations). Everything below is about C corporations.

When is Delaware franchise tax due

The annual report and the franchise tax for the prior year are due on or before March 1 (Delaware Code, Title 8, §502). The report is filed online, and a non-exempt domestic corporation pays a $50 filing fee on top of the tax (Division of Corporations). So the tax for 2026 is due by March 1, 2027.

Larger bills are paid in installments. A corporation owing $5,000 or more pays estimated tax during the year: 40% by June 1, 20% by September 1, 20% by December 1, and the remainder by March 1 (Division of Corporations). Payments over $5,000 must go by ACH debit.

Your registered agent receives the state's notice in December. That notice is where most founders first see a large number, which the next three sections explain.

The authorized shares method

The authorized shares method prices the tax on how many shares your charter allows you to issue, whether or not you have issued them. It is $175 for up to 5,000 shares, $250 for 5,001 to 10,000 shares, and $85 more for each additional 10,000 shares or part of 10,000, capped at $200,000 (Division of Corporations). A corporation the state lists as a large corporate filer pays $250,000 instead.

Startups are usually incorporated with millions of authorized shares so that founders, employees and investors can hold round numbers of cheap stock. The strike price on employees' options is then set from a 409A valuation of that common stock. That is exactly what this method penalizes:

The formula for anything over 10,000 shares is $250 plus $85 times the number of 10,000-share blocks above 10,000, rounding any partial block up. For 10,000,000 shares that is $250 plus $85 × 999, or $85,165.

The Division's assessment is based on authorized shares (Division of Corporations), and the law says that unless you report your issued shares and total gross assets, you pay under this method (§503(b)). If you do nothing, this is your bill.

The assumed par value capital method

The assumed par value capital method prices the tax on your total assets spread across your issued shares. It costs $400 per $1,000,000 of assumed par value capital or part of a million, with a $400 minimum and a $200,000 maximum. To use it, you report your issued shares and total gross assets on the annual report (Division of Corporations).

The Division's steps:

1. Find the assumed par. Divide total gross assets by total issued shares (including treasury shares), carried to six decimal places.
2. Price the cheap shares at the assumed par. Multiply the assumed par by the number of authorized shares whose par value is below it.
3. Price the expensive shares at their own par. Multiply any authorized shares with a par value above the assumed par by that par value.
4. Add steps 2 and 3. That is your assumed par value capital.
5. Compute the tax. If it is over $1,000,000, round up to the next million, divide by 1,000,000 and multiply by $400. If it is under $1,000,000, the tax is that fraction of $400, and the $400 minimum then applies.

"Total gross assets" means the total assets you report on IRS Form 1120, Schedule L, for the fiscal year ending in the calendar year the report covers (Division of Corporations). That is Schedule L, line 15, column (d) (IRS, Instructions for Form 1120 (2025)). Two consequences for startups:

• Gross means gross. Liabilities do not reduce it. Cash a customer paid for an annual plan counts in full even though it sits against deferred revenue on the balance sheet until you deliver.
• You need a year-end balance sheet even if the IRS does not. Corporations with total receipts and total assets under $250,000 need not complete Schedule L (IRS), but Delaware still asks for total assets, and March 1 comes before the federal return, which a calendar-year corporation generally files by April 15 (IRS). Close December first.

The method fails only when your par value is higher than your assumed par across most of your shares, or when your stock has no par value at all, in which case the Division says the authorized shares method always gives the lesser tax (Division of Corporations).

A worked example: the same startup before and after a seed round

Take a startup with a typical founder cap table: common stock at $0.00001 par. In its first year it has 10,000,000 authorized shares, 8,000,000 issued to the founders, and $150,000 of total assets at December 31. In its second year it raises a $3,000,000 seed round, authorizes 5,000,000 more common shares and 3,000,000 Series Seed preferred at the same par, issues the 3,000,000 preferred, and ends the year with $2,600,000 of total assets. That includes $200,000 of cash from annual prepays.

To keep the arithmetic readable, assume each year's share structure was in place for the whole year.

Year one: $150,000 ÷ 8,000,000 = $0.018750. Every authorized share has a par value below that, so the assumed par value capital is 10,000,000 × $0.018750 = $187,500. That is under $1,000,000, so the tax is $187,500 ÷ $1,000,000 × $400 = $75, raised to the $400 minimum.

Year two: $2,600,000 ÷ 11,000,000 = $0.236364. The assumed par value capital is 18,000,000 × $0.236364 = $4,254,552, which rounds up to 5 million and costs 5 × $400 = $2,000. That is under $5,000, so no estimated payments are due during the year.

If the charter is amended partway through a year, as it usually is when a round closes, the Division asks for issued shares and total gross assets for each period and prorates each period's tax by the days it was in effect (Division of Corporations). The totals move, but the gap between the two methods stays this wide.

Why your first notice shows a huge number

The December notice starts from the authorized shares method, because that is the method that needs no information from you. The fix is to enter your issued shares and total gross assets when you file. With those figures, Delaware charges whichever of the two taxes is lower (§503(a)).

If an earlier payment left your account with a credit, the Division has a refund request form for it (Division of Corporations FAQ). Keep the calculation, your issued share count from the cap table, and the year-end balance sheet with the filing, because the Secretary of State may ask for a copy of the Schedule L behind your total assets.

What happens if you pay late

Filing late costs a $200 penalty, and unpaid tax and penalty accrue interest at 1.5% per month (Division of Corporations). Worse, a corporation that neglects to pay or file for one year has its charter declared void, and its corporate powers become inoperative until it is restored (§510).

A void charter tends to surface at the worst time, because investors' and acquirers' counsel typically confirm good standing before closing. To reinstate, a corporation must file its annual report and pay all tax due (Division of Corporations).

This article explains what the Delaware rules say and what startups commonly do. If you have multiple share classes with different par values, a mid-year recapitalization, or foreign qualification elsewhere, have your CPA or counsel check the filing.

What to do before March 1

• In December, pull your authorized share count and par values from the current certificate of incorporation, including any amendments during the year.
• Close the books for December and take total assets from the year-end balance sheet, the same figure you will report on Form 1120, Schedule L, line 15.
• Take issued shares from the cap table as of year end, counting every class and any treasury shares.
• Run both methods. Use the steps above or the Division's calculator, and check that the assumed par value capital figure is the one you file.
• File and pay online by March 1, including the $50 report fee. If the tax is $5,000 or more, calendar the June 1, September 1 and December 1 estimated payments for the next year.
• Book it. Record the tax as an expense of the year it covers and accrue it at December 31, so it lands in the right period.

If your books are closed monthly, the year-end balance sheet is ready well before the deadline. LedgerIt closes each month for you and keeps the balance sheet you will need for Schedule L and this filing current.