Delaware Franchise Tax
Save thousands on your annual Delaware franchise tax. Most startups overpay by using the wrong calculation method. We optimize your filing and ensure March 1st compliance.
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Why Delaware Franchise Tax Matters
Every Delaware corporation must file an annual report and pay franchise tax by March 1st. The difference between calculation methods can save your startup tens of thousands of dollars annually.
Two Calculation Methods
Delaware allows corporations to choose between two methods: Authorized Shares Method or Assumed Par Value Capital Method. Startups almost always benefit from the Assumed Par Value method.
The Stakes Are High
An early-stage company with 10 million authorized shares could owe $85,165 using the Authorized Shares Method, but only $800 using the Assumed Par Value Method—a savings of $84,365.
Calculation Methods
Authorized Shares Method
Assumed Par Value Capital Method
How It Works
Gather Required Information
Collect the necessary data for your franchise tax calculation.
- Total gross assets from Schedule L of Form 1120 (federal tax return)
- Number of authorized shares (from your certificate of incorporation)
- Number of issued shares as of year-end (check your cap table)
- Par value per share (typically $0.0001 or $0.00001 for startups)
Calculate Using Both Methods
Delaware allows you to choose whichever method results in lower tax. Calculate both to determine the optimal filing method.
- Authorized Shares Method: Divide authorized shares by 10,000, multiply by $85
- Assumed Par Value Method: (Assets ÷ Issued Shares) × Authorized Shares, then divide by $1M and multiply by $400
- Choose the method with the lower result
- Most startups save significantly with Assumed Par Value method
File Annual Report & Payment
Submit your annual report and franchise tax payment through the Delaware Division of Corporations.
- File online at corp.delaware.gov by March 1st
- Pay $50 annual report filing fee
- Pay calculated franchise tax amount
- Keep confirmation for your records
Set Up Estimated Payments (if needed)
Companies owing $5,000 or more must make quarterly estimated payments for the following year.
- 40% due by June 1
- 20% due by September 1
- 20% due by December 1
- Remainder (20%) due by March 1
Key Deadlines
Annual Report & Franchise Tax Due
All Delaware corporations must file their annual report and pay franchise tax by this date.
Applies to: All Delaware C-corporations
First Estimated Payment (40%)
For companies that owed $5,000+ in the prior year, first estimated payment is due.
Applies to: Companies with prior year tax ≥ $5,000
Second Estimated Payment (20%)
Second quarterly estimated payment due.
Applies to: Companies with prior year tax ≥ $5,000
Third Estimated Payment (20%)
Third quarterly estimated payment due.
Applies to: Companies with prior year tax ≥ $5,000
Common Mistakes to Avoid
Using Default Authorized Shares Method
Can cost startups $50,000-$100,000+ in unnecessary taxes annually
Always calculate both methods. Assumed Par Value almost always saves money for early-stage companies with large option pools.
Missing the March 1st Deadline
$200 late fee plus 1.5% monthly interest on unpaid tax, compounding monthly
Set calendar reminders for February. Consider working with a service that handles filing automatically.
Using Incorrect Asset Values
Can trigger Delaware Division of Corporations audits or result in underpayment penalties
Must use Schedule L total assets from your federal Form 1120 tax return for the fiscal year ending in the prior calendar year.
Not Making Estimated Payments
Interest charges (1.5% monthly) accumulate if prior year tax was $5,000 or more
If you owed $5,000+ last year, set up quarterly estimated payments (40%, 20%, 20%, 20%) to avoid interest charges.
Zero Par Value Stock
Forces use of Authorized Shares Method, which is typically much more expensive for startups
Set a minimal par value (e.g., $0.0001 per share) in your certificate of incorporation to enable use of Assumed Par Value Method.
How Finvisor Helps
We handle your Delaware franchise tax filing from start to finish, ensuring optimal calculations and timely compliance.
Optimized Calculation
We calculate using both methods and file whichever saves you more—often $50K-$100K+ in savings annually.
Timely Filing
We track the March 1st deadline and file on your behalf with the Delaware Division of Corporations, ensuring you never miss the deadline.
Estimated Payment Management
If your tax exceeds $5K, we set up and manage quarterly estimated payments (40%, 20%, 20%, 20%) to avoid interest charges.
Frequently Asked Questions
How much can I save on Delaware franchise tax?
Most startups save $50,000-$100,000 annually by using the Assumed Par Value Capital method instead of the default Authorized Shares method. For example, a startup with $500K in assets and 10M authorized shares would pay only $400 using Assumed Par Value versus $85,000 using Authorized Shares—a savings of $84,600. The exact savings depend on your company's assets, authorized shares, and issued shares.
When is Delaware franchise tax due?
Delaware franchise tax is due by March 1st annually. The annual report filing fee ($50) and franchise tax payment must be submitted together by this deadline. Late filings incur a $200 penalty plus 1.5% monthly interest on unpaid tax. Companies that owed $5,000 or more in the prior year must also make quarterly estimated payments for the current year.
Which calculation method should my startup use?
Almost all startups should use the Assumed Par Value Capital Method, which typically results in dramatically lower taxes for asset-light companies with large option pools. The Authorized Shares Method charges $85 per 10,000 shares authorized, which quickly becomes expensive. The Assumed Par Value Method is based on your gross assets and the ratio of issued to authorized shares, usually resulting in the minimum $400 tax for early-stage companies.
What if my company has zero par value stock?
Companies with zero par value stock are required to use the Authorized Shares Method, which is typically much more expensive for startups. If your certificate of incorporation specifies zero par value, you may want to consider amending it to establish a minimal par value (e.g., $0.0001 per share). This enables use of the Assumed Par Value Method and can save tens of thousands of dollars annually.
What are the estimated payment requirements?
If your franchise tax for the prior calendar year was $5,000 or more, you must make estimated payments for the current year. The payment schedule is: 40% due June 1, 20% due September 1, 20% due December 1, and the remaining 20% due March 1 with your annual report. Failure to make estimated payments results in 1.5% monthly interest charges.
Where do I find my total gross assets?
Your total gross assets must come from Schedule L (Balance Sheet) of your federal Form 1120 (U.S. Corporation Income Tax Return). Use the 'Total Assets' figure from the end-of-year column. This is the only acceptable source for the Assumed Par Value Capital Method calculation. Do not use your bookkeeping software balance sheet or estimated assets—Delaware requires the federal tax return figure.
Can Finvisor handle this for me?
Yes. We calculate your franchise tax using both methods, file your annual report with the Delaware Division of Corporations, make the payment on your behalf, and set up estimated payment schedules if needed. We track the March 1st deadline and handle everything so you never risk late fees or overpayment. This is included in our compliance management services.
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Learn MoreReady to optimize your Delaware franchise tax?
Let us calculate both methods and save you thousands on your next filing.