What the Delaware Franchise Tax Actually Is
The Delaware franchise tax is the annual fee that every Delaware-incorporated C-corporation pays to maintain good standing with the state. It is not an income tax. It applies whether your C-corp has revenue, losses, or no operations at all. The tax is the price of being a Delaware C-corporation and accessing Delaware's well-developed corporate law.
Delaware's franchise tax structure exists because the state has positioned itself as the default jurisdiction for sophisticated US corporations. Over 60% of Fortune 500 companies and over 80% of newly public US companies are Delaware-incorporated. The franchise tax is one of the state's largest revenue sources and underwrites the specialized Court of Chancery that hears corporate disputes without juries.
Who pays it
Every Delaware C-corporation pays the franchise tax annually, regardless of where the company actually operates. A Delaware C-corp headquartered in San Francisco, Austin, or New York still owes Delaware franchise tax. The obligation begins the year the entity is formed and continues every year until the entity is formally dissolved through the Delaware Division of Corporations.
Who does not pay it
Delaware LLCs, LPs and general partnerships pay a flat $400 annual tax under Delaware Code title 6, section 18-1107, due June 1, and they file no annual report at all. Delaware S-corps still pay the franchise tax in the same way as C-corps, because the S-election is a federal tax classification, not a state corporate-form change. Delaware non-profits, exempt corporations, and statutory trusts have separate fee structures. This article focuses on the C-corp franchise tax specifically.
Who Files What in Delaware: Corporations Versus LLCs, LPs and GPs
Delaware runs two separate regimes and the phrase franchise tax gets applied to both. The obligations differ, the deadlines differ, and one of the two entity families has no annual report at all.
| Entity type | Annual filing | State charge | Due |
|---|---|---|---|
| Corporation (non-exempt domestic) | Annual report, required | $50 report fee plus franchise tax | March 1 |
| Corporation (exempt) | Annual report, required | $25 report fee, no franchise tax | March 1 |
| LLC, LP or GP | None. Delaware has no LLC annual report | $400 flat annual tax | June 1 |
| LLCs pay a $400 annual tax by June 1 and file NO annual report. Corporations file a $50 annual report by March 1 plus franchise tax from $175 (authorized shares) or $400 (assumed par value), capped at $200,000. | |||
That split is why a Delaware LLC owner reading a corporation article hunts for a report that does not exist, and why a corporation owner reading an LLC article shows up on June 1 three months late. If you are still choosing between the two forms, read C-corporation versus S-corporation and what a Delaware LLC costs first.
There is no proration and no revenue test. An LLC formed on December 20 owes the full $400 for that calendar year, due the following June 1, whether or not it traded. Ignore it long enough and Delaware Code title 6, section 18-1108 cancels the certificate of formation on the third anniversary of the first missed due date, a harder hole to climb out of than a void corporate charter. Owners who would rather not remember can put the entity on compliance monitoring or check annual report deadlines by state.
One more distinction worth holding on to: Delaware franchise tax is not an income tax and does not replace one. A Delaware entity that operates in another state still owes that state its own filings, which is what franchise tax by state lays out, and the federal picture sits in the LLC tax guide. Delaware also requires a registered agent with a Delaware address for every entity, covered in the Delaware registered agent guide.
The Two Calculation Methods: Authorized Shares vs. Assumed Par Value
Authorized Shares vs Assumed Par Value: Comparison
| Method | Best for | Minimum | How calculated |
|---|---|---|---|
| Authorized Shares | Low authorized-share counts | $175 | Tiered fee based on number of authorized shares |
| Assumed Par Value | High authorized + low assets (typical startup) | $400 | (Gross Assets / Issued Shares) × Authorized Shares × $400 per $1M |
| You pay the LOWER of the two. Always calculate both. | |||
Delaware lets you calculate franchise tax under either of two methods, and you pay the lower of the two. Most companies should run both calculations every year because the optimal method changes as the company grows.
Method 1: Authorized Shares Method
Under the Authorized Shares method, the tax is calculated based on the total number of shares your charter authorizes (whether issued or not). The Division of Corporations publishes the schedule in three steps: $175 for 5,000 or fewer authorized shares, $250 for 5,001 to 10,000 authorized shares, and $85 more for each additional 10,000 shares or any portion of 10,000 above that. The maximum annual franchise tax is $200,000. Only a Large Corporate Filer, a designation Delaware applies to a small set of very large public companies, reaches the separate $250,000 ceiling.
This method tends to penalize startups that authorized 10 million or 100 million shares at incorporation (a common Silicon Valley pattern) even when only a small fraction were issued. A C-corp with 10 million authorized shares pays approximately $85,000 under this method.
Method 2: Assumed Par Value Capital Method
Under the Assumed Par Value method, the tax is based on the corporation's gross assets divided by issued shares, multiplied by a fixed rate. The formula is: (Total Gross Assets / Total Issued Shares) × Total Authorized Shares = Assumed Par Value. The tax rate is $400 per million dollars of Assumed Par Value, with a $400 minimum.
For an early-stage startup with $500,000 in assets and 5 million issued shares of 10 million authorized, the Assumed Par Value works out to $1 million, generating a $400 tax bill. The same company under the Authorized Shares method would owe approximately $85,000. The savings from running both calculations are substantial.
File your annual report
If you would rather not do this yourself, we pull your record from the state, prefill every field, and track the deadline for next year. Or keep reading and file it on your own. This guide covers everything you need either way.
The March 1 Deadline and the $200 Late Penalty
Pre-filing Checklist
- Confirm current officer/manager information matches state records
- Verify registered agent address matches the agent's current record
- Check filing fee amount against the state's current fee schedule
- Confirm prior-year obligations are clear (no outstanding reports)
- Verify entity status is active (not administratively dissolved)
- Set a calendar reminder for next year's deadline
Delaware franchise tax and the accompanying annual report are due on March 1 of each year for the prior calendar year, and the report itself carries a $50 filing fee for a non-exempt domestic corporation. Corporations whose franchise tax will exceed $5,000 do not wait for March at all: Delaware requires estimated payments of 40 percent by June 1, 20 percent by September 1, 20 percent by December 1 and the balance by March 1. The annual report is a single page filed online at the Division of Corporations portal, and it must accompany payment of the tax.
What you file
The annual report includes: the corporation's legal name and file number, the principal place of business address, the names and addresses of all directors as of January 1, and the name and address of one officer authorized to sign the report. The report must be signed by an officer or director. Payment is submitted alongside the report through the state portal.
The late penalty
Missing the March 1 deadline triggers a $200 penalty under Delaware Code title 8, section 502(c), plus interest at 1.5 percent for each month or portion of a month under section 504(c). Take a corporation sitting at the $400 assumed par value minimum. The $400 tax alone accrues $6 a month, or $72 across a full year. Add the $200 penalty and the balance is $600, on which interest runs at $9 a month, so six months of silence turns a $400 bill into $654 and a full year turns it into $708. The $50 annual report fee is still owed on top.
Loss of good standing
Failure to file the report and pay the tax costs the corporation its good standing, the first thing a lender or an acquirer asks to see. Delaware Code title 8, section 510 goes further: a corporation that neglects for one year to pay the franchise tax or file a complete annual report has its charter declared void, after a notice sent by November 30 giving until the following March 1 to comply. A void charter is repaired by a certificate of renewal and revival, which requires every missed year of tax, penalty and interest to be paid first. Read the mechanics in our guide to Delaware reinstatement, and see what a certificate of good standing proves before you promise one to a counterparty.
Common Filing Mistakes That Cost Delaware C-Corps
Delaware franchise tax is a routine annual obligation, but several common mistakes drive up bills unnecessarily or trigger penalties.
Mistake 1: Defaulting to the Authorized Shares calculation
Delaware's online portal defaults to displaying the Authorized Shares tax first. Many founders pay the displayed amount without checking the Assumed Par Value alternative. For most startups with high authorized-share counts and modest assets, the Assumed Par Value method produces a substantially lower bill. Always calculate both and pay the lower amount.
Mistake 2: Forgetting that the tax applies even with no revenue
A Delaware C-corp that has never earned a dollar of revenue still owes franchise tax. The minimum is $400 (Assumed Par Value) or $175 (Authorized Shares, with 5,000 or fewer authorized). Pre-revenue companies, dormant entities, and corporations preparing for a future raise all pay the minimum every year.
Mistake 3: Using outdated officer information
The annual report requires the name and address of one currently authorized officer. Filing with a former officer's name (someone who left the company) can create issues during diligence or banking verification. Confirm officer information matches your current cap table and operating reality before submitting.
Mistake 4: Treating the LLC tax as if it were the corporate report
This runs in both directions. An LLC owner hunting for a March 1 annual report finds nothing, assumes the entity is clear, and discovers on June 2 that $400 plus a $200 penalty is due. A corporation owner who read an LLC page arrives on June 1, three months after the corporate report was already late. Confirm which regime the entity is in before calendaring anything, and if you hold both forms in Delaware, calendar both dates. Our Delaware annual report guide covers the corporate side in detail.
Mistake 5: Missing the June 1 estimated payment on a large franchise tax bill
A corporation whose franchise tax will exceed $5,000 owes 40 percent of it by June 1, not on the following March 1. Companies that raised a round mid-year cross the $5,000 line without noticing, because the previous year's bill was the minimum, and each missed instalment carries the same 1.5 percent monthly interest. Run the assumed par value calculation in May from the prior year end balance sheet, and if the answer clears $5,000, book all four dates at once.
How to Reduce Your Delaware Franchise Tax Bill
Two strategies are available to reduce the annual franchise tax bill, both of which require planning at incorporation or through a board-approved charter amendment.
Strategy 1: Reduce authorized shares
If your C-corp authorized far more shares than needed (a 10-million-share charter is common but rarely necessary at formation), you can amend the charter to reduce the authorized share count. The amendment costs a $194 filing fee plus legal review, but the annual tax savings can run thousands of dollars per year. This is most cost-effective for companies that authorized large share counts but do not anticipate large share issuances in the near term.
Strategy 2: Maintain a high par value
Setting a par value on shares affects the Assumed Par Value calculation. Shares with a $0.0001 par value (the typical Silicon Valley default) maximize the Assumed Par Value method's downward effect. Setting a meaningfully higher par value increases the Assumed Par Value calculation, which can make the Authorized Shares method optimal instead. Most companies want low par values, but advisors should review this for unusual cap structures.
Three Delaware Entities, Three Bills
The same word, franchise tax, produces three completely different invoices depending on the entity and the balance sheet behind it. These are the three shapes we see most often.
Example 1 - the default that costs 68 times too much
Ninetree Robotics Inc incorporated in Delaware with 10,000,000 authorized shares, issued 6,200,000 of them to founders and early employees, and closed the year with $1,850,000 in gross assets. The portal opened on the authorized shares method: $250 for the first 10,000 shares, then $85 for each additional 10,000, which across 9,990,000 remaining shares is 999 increments and $84,915, for $85,165. The assumed par value method divides $1,850,000 in gross assets by 6,200,000 issued shares for an assumed par of $0.29839, multiplies by 10,000,000 authorized shares for assumed par value capital of $2,983,871, and charges $400 per million or portion of a million. Three portions, $1,200.
Outcome: Delaware lets you pay the lower of the two, and the founder who pays the first number Delaware shows pays 68 times what the company owes. Run both every year; the answer flips as gross assets grow.
Example 2 - the raise that triggered quarterly payments
Halcyon Bridge Therapeutics Inc paid the $400 minimum for three years. Then a financing closed and gross assets finished the year at $46,000,000 against 9,000,000 issued and 15,000,000 authorized shares. Assumed par is $5.1111, assumed par value capital is $76,666,667, and at $400 per million or portion the franchise tax is $30,800. What changed is the calendar: a corporation owing more than $5,000 pays 40 percent by June 1, 20 percent by September 1, 20 percent by December 1 and the balance by March 1.
Outcome: The finance lead who calendared only March 1 was already five months late on the largest installment before anyone looked. Recalculate in May, not in February.
Example 3 - the LLC that went looking for a report
Duskwater Payments LLC searched the Division of Corporations site every February for a Delaware annual report, found none, and concluded there was nothing to file. Delaware LLCs genuinely have no annual report. What they have is a $400 flat tax under section 18-1107, due June 1. Duskwater paid on November 3: the $400 tax, a $200 penalty, and interest at 1.5 percent a month on both, which is $9 a month against a $600 balance.
Outcome: Absence of a report is not absence of an obligation. The June 1 date is the one to calendar, and three consecutive missed years cancels the certificate of formation outright.
File.Business Manages Delaware Franchise Tax for You
File.Business handles annual Delaware franchise tax and annual report filing for C-corps registered with our compliance service. We calculate both methods automatically, file the report and pay the tax before the March 1 deadline, and notify you of any optimization opportunities (such as charter amendments) that could reduce future bills. The service includes ongoing good-standing monitoring and a same-day reminder system if anything in your corporate status changes.
Frequently asked questions
When is the Delaware franchise tax due?
March 1 of each year for the prior calendar year. The annual report must be filed alongside the tax payment through the Delaware Division of Corporations portal.
What is the minimum Delaware franchise tax?
$175 under the Authorized Shares method (for 5,000 or fewer authorized shares), or $400 under the Assumed Par Value Capital method. You pay the lower of the two calculations. Most companies should run both every year.
Do Delaware LLCs pay franchise tax?
No. Delaware LLCs pay a flat $400 annual tax (not the franchise tax). Only Delaware corporations (C-corps and S-corps) pay the franchise tax under the structure described in this article.
What happens if I miss the March 1 deadline?
An automatic $200 penalty plus 1.5% monthly interest on the tax and penalty. Under Delaware Code title 8, section 510 the charter is declared void after one year of neglect, and reviving a void charter costs far more than choosing to dissolve deliberately.
Can I reduce my Delaware franchise tax bill?
Yes. Two strategies: (1) reduce the authorized share count via a charter amendment if you authorized far more shares than needed, and (2) maintain a meaningful par value if the Assumed Par Value calculation would otherwise be higher than the Authorized Shares method.
Do I owe Delaware franchise tax if my company has no revenue?
Yes. The franchise tax applies regardless of revenue, profitability, or business activity. A Delaware C-corp that has never earned a dollar still owes the minimum franchise tax every year until it is formally dissolved.
How do I dissolve a Delaware corporation to stop franchise tax?
File a Certificate of Dissolution with the Delaware Division of Corporations. The certificate must be signed by an authorized officer. All back franchise tax must be paid before dissolution is processed. The filing fee is $204.
Let File.Business handle the filing.
We pull your record from the state, prefill every field, and validate before submission. Same-day filing in most states. First year of registered agent included with new entity formations.
This guide is written from the official sources below. Fees, forms, and deadlines change; confirm the current requirement with the agency before you file.
Disclosure. File.Business is a private filing service, not a government agency and not a law firm. We prepare and submit filings at your direction, and nothing on this page is legal or tax advice. Filing fees, deadlines, and statutory references are current as of the last-updated date shown above and can change. Confirm current requirements with the relevant state agency before you file.
