One calculation method could cost your corporation over $76,000 in Delaware franchise tax. The other? Just $5,600. Here’s how to make sure you’re paying the lesser amount before the March 1 deadline.
Key Takeaways
- Delaware provides two franchise tax calculation methods — the Authorized Shares Method and the Assumed Par Value Capital Method. You should always calculate both and pay whichever produces the lesser amount.
- The difference can be enormous. In our example below, the Authorized Shares Method produces a tax of $76,665, while the Assumed Par Value Capital Method drops it to just $5,600 — a savings of over $71,000 for the same corporation.
- The March 1, 2026 filing deadline falls on a Sunday, and Delaware does not automatically extend it. File by the last week of February to avoid the $200 penalty plus 1.5% monthly interest.
If your company is incorporated in Delaware, you’re required to pay an annual Delaware franchise tax. What many business owners don’t realize, however, is that the state provides two different calculation methods — and the difference between them can be staggering. As a result, choosing the wrong method could mean overpaying by tens of thousands of dollars every single year.
We regularly see corporations receive initial tax calculations for enormous sums, only to discover that using the alternative method brings the bill down to a fraction of that amount. In this post, we’ll walk through both methods step by step, show you the math with a real-world example, and explain how to make sure you’re always paying the lowest amount allowed under the law.
What Is the Delaware Franchise Tax?
First, it’s important to understand what this obligation actually is. The Delaware franchise tax is not an income tax. Instead, it’s a tax paid for the privilege of being incorporated in the state. Consequently, it applies to every domestic for-profit corporation — stock and non-stock alike — regardless of where you conduct business or earn revenue. This requirement has been in effect since January 1, 2018.
Delaware provides two methods for calculating this tax. Most importantly, you are permitted to use whichever method produces the lower result. Here is how the two methods compare at a glance:
| Name | Authorized Shares Method | Assumed Par Value Capital Method |
|---|---|---|
| Based on | Number of authorized shares | Issued shares, gross assets, and par values |
| Minimum tax | $175.00 | $400.00 |
| Maximum tax | $200,000.00 | $200,000.00 |
| Data needed | Authorized share count only | All issued shares, total gross assets (Form 1120, Schedule L) |
| Best for | Small share counts; no-par-value stock | Many authorized shares with modest assets |
Note: The maximum tax under both methods is $200,000, unless the corporation has been identified as a Large Corporate Filer (generally entities listed on a national securities exchange meeting certain revenue and asset thresholds), in which case the maximum increases to $250,000.
Important The Delaware Division of Corporations initially calculates your franchise tax using the Authorized Shares Method. However, if the Assumed Par Value Capital Method produces a lower figure, you should use that method instead. Always run both calculations before you file.
Delaware Franchise Tax Method 1: Authorized Shares
This is the simpler of the two Delaware franchise tax calculations. Your tax is based entirely on the total number of shares your corporation is authorized to issue, as stated in your certificate of incorporation. Because of this simplicity, no additional financial data is needed.
Rate schedule
| Authorized Shares | Tax Amount |
|---|---|
| 5,000 or fewer | $175.00 (minimum) |
| 5,001 – 10,000 | $250.00 |
| Each additional 10,000 shares or portion thereof | Add $85.00 |
| Maximum | $200,000.00 |
For a small corporation with 5,000 authorized shares, the tax is just $175. However, this is where the method becomes problematic: many corporations — particularly startups that have raised venture capital — authorize millions of shares. As a consequence, the tax bill under this method climbs rapidly and can reach tens of thousands of dollars.
Note for no-par-value stock: If your corporation has no-par-value stock, the Authorized Shares Method will always produce the lesser tax. Therefore, you do not need to calculate the second method.
Example: Authorized Shares Method calculation
To illustrate the impact, consider a technology startup called TechVenture Inc. that has authorized 9,000,000 shares of common stock in its certificate of incorporation. This share count is typical for a venture-backed Delaware corporation.
Under the Authorized Shares Method, the Delaware franchise tax calculation works as follows:
- First 10,000 shares: $250.00
- Remaining shares: 9,000,000 − 10,000 = 8,990,000
- Number of 10,000-share increments: 8,990,000 ÷ 10,000 = 899 increments
- Additional tax: 899 × $85.00 = $76,415.00
- Total tax: $250.00 + $76,415.00 = $76,665.00
Authorized Shares Method
TechVenture Inc.
9,000,000 authorized shares
$76,665.00
$250.00 + (899 × $85.00)
That’s over $76,000 in Delaware franchise tax for a company that may still be pre-revenue. Fortunately, the second method often provides a dramatically lower result for corporations like this one.
Delaware Franchise Tax Method 2: Assumed Par Value Capital
This alternative method uses a formula that factors in your company’s issued shares (including treasury shares), total gross assets, and the par value of your stock. As a result, it often produces a far lower tax bill for corporations with large share counts but relatively modest asset bases.
To use this method, you must report all issued shares and total gross assets on your Annual Franchise Tax Report. Specifically, total gross assets should match the “total assets” line from your U.S. Form 1120, Schedule L, for the fiscal year ending in the calendar year of the report.
The tax rate under this method is $400.00 per million dollars (or portion thereof) of assumed par value capital. If the assumed par value capital is less than $1,000,000, the tax is calculated by dividing the assumed par value capital by $1,000,000 and then multiplying by $400.00. In all cases, the minimum tax under this method is $400.00.
Five-step calculation with example
Let’s continue with TechVenture Inc. to show the contrast. Assume the company has 9,000,000 authorized shares of common stock with a $0.001 par value, has issued 2,000,000 shares, and reports $3,000,000 in total gross assets on its federal return.
Calculate the assumed par value
Divide total gross assets by total issued shares, carrying to six decimal places.
$3,000,000 ÷ 2,000,000 shares = $1.500000 assumed par
Multiply assumed par by shares with par value below the assumed par
Since the actual par value ($0.001) is less than the assumed par ($1.50), all 9,000,000 authorized shares qualify for this step.
$1.500000 × 9,000,000 = $13,500,000
Calculate for shares with par value above the assumed par
If any authorized shares have a par value greater than the assumed par, multiply those shares by their respective par value. In this case, there are none.
$0 (no shares with par value above $1.50)
Add the results to get assumed par value capital
Combine the results of Steps 2 and 3 to arrive at the assumed par value capital.
$13,500,000 + $0 = $13,500,000 assumed par value capital
Calculate the tax
Round the assumed par value capital up to the next million (if over $1,000,000), divide by $1,000,000, and multiply by $400.00.
$13,500,000 rounds up to $14,000,000 → 14 × $400.00 = $5,600.00
Assumed Par Value Capital Method
TechVenture Inc.
Same company, same shares
$5,600.00
14 × $400.00
Delaware Franchise Tax: Side-by-Side Comparison
Now let’s put both results next to each other. Here’s what TechVenture Inc. would owe under each method — for the exact same corporation, in the exact same year:
Method 1
Authorized Shares
$76,665
Based on 9,000,000 authorized shares
Method 2
Assumed Par Value Capital
$5,600
Based on issued shares, assets, and par value
Tax savings by choosing the right method$71,065A 92.7% reduction for the same corporation
The only difference is the calculation method selected on the Annual Franchise Tax Report. Because Delaware allows you to use whichever method produces the lesser tax, failing to compare both methods is one of the most common — and most expensive — mistakes we see corporations make.
Which Calculation Method Should You Use?
As a general rule, here is how to determine which Delaware franchise tax method is likely better for your corporation:
- Fewer than 10,000 authorized shares: The Authorized Shares Method will typically produce the lower tax. The minimum under this method is just $175.
- No-par-value stock: The Authorized Shares Method will always produce the lesser tax. As a result, there is no need to calculate the second method.
- Millions of authorized shares: The Assumed Par Value Capital Method will almost always result in a significantly lower tax. This is especially true for startups, venture-backed companies, and holding companies with large share counts but relatively modest total assets.
Nevertheless, the only way to know for certain is to run both calculations. As our example above demonstrates, the results can differ by tens of thousands of dollars.
Delaware Franchise Tax Filing Deadlines for 2026
Corporations
March 1, 2026
LLCs / LPs / GPs
June 1, 2026
The Annual Franchise Tax Report and payment for corporations are due on or before March 1 each year. It’s worth noting that in 2026, March 1 falls on a Sunday, and Delaware does not automatically extend the deadline to Monday. For this reason, we strongly recommend completing your filing by the last week of February.
For LLCs, limited partnerships, and general partnerships, the flat annual tax of $300 is due on or before June 1. Although these entities do not file an annual report, they must still pay the tax to maintain good standing with the state.
Estimated payment schedule for corporations owing $5,000+
In addition, corporations with a Delaware franchise tax liability of $5,000 or more are required to make quarterly estimated payments according to this schedule:
40%
June 1
20%
September 1
20%
December 1
20%
March 1
Penalties for Missing the Deadline
Don’t miss the deadline Failure to file and pay the Delaware franchise tax by the due date results in a $200 penalty plus 1.5% interest per month on the unpaid tax and penalty. Furthermore, the Delaware Secretary of State will not issue a Certificate of Good Standing for corporations with outstanding franchise tax obligations. Prolonged non-compliance — more than one year — can ultimately result in the voidance of your corporation’s charter.
What You Need to File Your Delaware Franchise Tax Report
Before you file your Annual Franchise Tax Report, make sure you have the following information ready:
- Your Delaware file number (found in your certificate of incorporation or by searching the Delaware Division of Corporations entity search)
- The number of authorized shares and their par values
- If using the Assumed Par Value Capital Method: total issued shares (including treasury shares) and total gross assets from your federal return (Form 1120, Schedule L)
- Your corporation’s principal place of business address
- A description of the nature of your business (this is a new requirement starting with 2025 filings)
All filings must be submitted electronically through the Delaware Division of Corporations website. Additionally, payments exceeding $5,000 require ACH debit. The annual report filing fee is $50 for non-exempt corporations and $25 for exempt corporations.
Non-Stock For-Profit Corporations
Non-stock, for-profit corporations that do not meet the exempt corporation requirements are required to pay a flat Delaware franchise tax of $175.00. If your entity qualifies for exempt status, it must still file an Annual Report with a $25 filing fee, although no franchise tax is owed.
Mid-Year Amendments and Prorated Tax
If your corporation filed an amendment during the year that changed its stock structure or par value, the Delaware franchise tax must be prorated. Specifically, you’ll need to provide issued shares and total gross assets within 30 days of the amendment for each portion of the year in which a different authorized capital structure was in effect.
The tax for each period is then calculated separately, prorated based on the number of days each structure was active (divided by 365, or 366 in a leap year), and summed for the total annual tax.
The Bottom Line
Take action before March 1 Always calculate your Delaware franchise tax using both methods before you file. For many corporations — particularly those with large numbers of authorized shares — the Assumed Par Value Capital Method can reduce the tax bill by 90% or more. Don’t leave money on the table by filing with the default calculation.
If you would like help calculating your Delaware franchise tax under both methods, determining the most cost-effective approach, or filing your Annual Franchise Tax Report, our team is here to assist. Contact us today to make sure you’re prepared well before the March 1 deadline.
File online: corp.delaware.gov/paytaxes
Delaware Division of Corporations: (302) 739-3073
This post is for informational purposes only and does not constitute legal or tax advice. Please consult a qualified professional for guidance specific to your situation.