If your startup is a Delaware corporation, you owe an annual franchise tax. Here are the deadlines, the two calculation methods, and a yearly routine.

Key takeaways:

• Delaware corporations file an annual report and pay franchise tax online by March 1.
• There are two methods: Authorized Shares (minimum $175) and Assumed Par Value Capital (minimum $400).
• The maximum is $200,000, or $250,000 for Large Corporate Filers.
• Late filing carries a $200 penalty plus 1.5% monthly interest. Run both methods and use the lower tax.

Forming a Delaware corporation is the beginning, not the end. The franchise tax comes back every year.

1. What the Delaware franchise tax is

Many startups incorporate in Delaware. Every Delaware corporation has to file an annual report and pay an annual franchise tax. It is a yearly cost of being a Delaware corporation, separate from the one-time cost of forming it.

According to the Delaware Division of Corporations, domestic corporation annual reports and franchise taxes for the prior year are due on or before March 1 and must be filed online.

If you are still deciding where to incorporate, start with how to incorporate a company in the U.S. and LLC vs. C-corp for startups.

2. Two methods, two minimums

Delaware lets corporations calculate the tax in two ways:

• Authorized Shares Method: minimum tax of $175.
• Assumed Par Value Capital Method: minimum tax of $400.
• Maximum: $200,000 under both methods. Corporations identified as Large Corporate Filers have a maximum of $250,000.

The calculation details sit on separate Delaware pages and in Delaware’s franchise tax calculator, so use the official calculator for your own numbers.

3. Why startups should check both methods

Startups often create a large number of authorized shares to leave room for founders, employees, and investors, while holding very little in assets. Depending on those numbers, the two methods can produce very different results, so run both and file using the one that gives the lower tax. If your first bill looks surprisingly high, that is usually the reason to check the other method before paying.

This is also a good example of why founders should not simply accept the first number a form generates. Our guide on verifying AI-generated legal documents uses the same habit: check the source yourself.

4. What happens if you file late

Delaware’s page states a late filing penalty of $200 plus 1.5% monthly interest on the tax and penalty. Calendar the March 1 date and assign someone to own it.

5. A simple yearly routine

1. Gather your authorized shares, issued shares, and balance sheet numbers.
2. Run both methods using Delaware’s calculator.
3. Use the method that produces the lower tax.
4. File the annual report and tax online.
5. Pay before March 1.

Ask your accountant or registered agent to confirm the filing, especially in your first year.

6. Does this affect LLCs?

This article covers corporations. Delaware LLCs have their own annual requirements, so check the Division of Corporations for the entity you actually formed. If you are weighing structures, see LLC vs. C-corp.

7. Where DoubleCheck fits

DoubleCheck is built for businesses that start legal work with AI. Bring your question or draft, use an AI-first workflow to understand and verify it, and when professional advice is warranted, you can connect with an independent attorney. Attorneys on DoubleCheck are independent professionals; an attorney-client relationship forms only if an attorney accepts your engagement.

Sources: Delaware Division of Corporations: Pay Taxes and Delaware fees and calculators.

FAQ

When is the Delaware franchise tax due?

According to the Delaware Division of Corporations, domestic corporation annual reports and franchise taxes are due on or before March 1 and must be filed online.

What is the minimum Delaware franchise tax?

$175 under the Authorized Shares Method and $400 under the Assumed Par Value Capital Method, according to Delaware’s website.

What is the maximum Delaware franchise tax?

$200,000 under both methods. Large Corporate Filers have a maximum of $250,000.

What if I file the Delaware franchise tax late?

Delaware states a $200 penalty plus 1.5% monthly interest on the tax and penalty.

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General information only. This article is not legal, tax, investment, or accounting advice.