October 14, 2026
Delaware calculates franchise tax two ways, and the notice it sends uses the method that produces the largest bill, because the state doesn’t know your company’s assets. Most early-stage startups owe far less under the other method. With two numbers, your issued shares and your total gross assets, you can recalculate and file online before March 1.
Key takeaways
Every Delaware corporation pays an annual franchise tax for the right to exist as a Delaware corporation. The state lets you calculate it under either the Authorized Shares Method or the Assumed Par Value Capital Method, and you pay whichever is lower. But the notice Delaware sends, often forwarded by your registered agent, is calculated under the Authorized Shares Method, because that is the only one the state can compute without your financial information.
Startups typically authorize millions of shares with a very low par value, so the Authorized Shares Method produces an alarming number. It isn’t what you owe. You just need to file using the other method.
This method looks only at the number of shares your charter authorizes:
| Authorized shares | Tax |
|---|---|
| 5,000 or fewer | $175 (the minimum) |
| 5,001 to 10,000 | $250 |
| Each additional 10,000 shares or part of 10,000 | Add $85 |
The maximum is $200,000. A startup with 10,000,000 authorized shares pays $250 for the first 10,000 shares plus $85 for each of the remaining 999 blocks of 10,000, for a total of $85,165.
This method uses your total gross assets and your issued shares to calculate an “assumed par value” for your stock:
Total gross assets means the total assets on your federal tax return (Form 1120, Schedule L) for the year. Issued shares includes all shares the company has issued, including any treasury shares. Options and SAFEs are not issued shares.
Take a startup with 10,000,000 authorized shares at $0.00001 par, 8,000,000 shares issued and $800,000 of gross assets at year end.
| Authorized Shares Method | Assumed Par Value Capital Method | |
|---|---|---|
| Calculation | $250 + (999 x $85) | $800,000 / 8,000,000 = $0.10 assumed par; $0.10 x 10,000,000 = $1,000,000 capital |
| Franchise tax | $85,165 | $400 |
| Plus annual report fee | $50 | $50 |
| Total due | $85,215 | $450 |
The tax grows as the company’s assets grow. If the same company had $3,000,000 of gross assets after a seed round, the assumed par would be $0.375, the assumed par value capital would be $3,750,000, and the tax would be $1,600 (four units of $1,000,000 at $400 each). That’s still a small fraction of the Authorized Shares Method. Delaware’s franchise tax calculation page walks through the same steps.
Get your issued share count from your cap table and your total gross assets from your year-end balance sheet or tax return. Then file the annual report online on the Delaware Division of Corporations website, enter both numbers, and the system will calculate the tax under the Assumed Par Value Capital Method. Pay the tax and the $50 annual report fee when you file. A founder or your registered agent can usually do this in a few minutes once you have the numbers.
The annual report and franchise tax are due by March 1 each year. Your first report is due on March 1 of the year after you incorporate. If you miss the deadline, Delaware charges a $200 penalty plus interest of 1.5% per month on the unpaid tax. If your franchise tax is $5,000 or more, Delaware also requires estimated payments during the year: 40% by June 1, 20% by September 1 and 20% by December 1, with the balance due with the annual report on March 1. See Registered Agent for how notices reach you.
If a corporation goes long enough without filing and paying, Delaware voids its charter, and the company loses its good standing. You can revive it by filing a certificate of renewal and revival and paying all back taxes, penalties, interest and missing annual reports. It’s a routine filing, and your registered agent or counsel can usually handle it quickly. Until it’s done, don’t sign contracts or raise money, since investors will check good standing.
Yes. The company owes the annual report and franchise tax through the year it dissolves, and Delaware requires the taxes to be paid before it will accept the certificate of dissolution. See How Do I Shut Down My Startup?
Delaware LLCs don’t use either method. They pay a flat annual tax of $400, due June 1, and don’t file an annual report. Late payment carries a $200 penalty plus 1.5% interest per month.
No. Authorizing 10,000,000 shares at $0.00001 par is the standard startup setup, and the option pool and future financings need that room. Under the Assumed Par Value Capital Method, what drives the bill is how much of your authorized stock you’ve actually issued. The method divides your assets by your issued shares and then multiplies the result by your authorized shares, so the smaller your issued count is relative to your authorized count, the higher the tax.
Take the same $800,000 of gross assets from the example above. A company that has issued 8,000,000 of its 10,000,000 authorized shares owes $400. One that has issued only 1,000,000 has an assumed par of $0.80, assumed par value capital of $8,000,000 and a tax of $3,200. A company in the standard setup, with most of its authorized shares issued to the founders, keeps the tax low, and the bill then grows mainly with the company’s assets. If you’ve issued only a small fraction of your authorized shares and the bill is larger than you expected, talk to counsel before changing your charter. See How Many Shares Should a Startup Company Have? and How to Determine the Par Value for Your Startup’s Stock.
For more on staying in good standing, see I Just Incorporated My Startup. Do I Need to Do Anything Else? and Do I Need to Foreign Qualify My Delaware Startup? If you’d like help with a franchise tax notice or reviving a company, contact us.
