Delaware franchise tax: why the bill says $85,000 and the truth says $400

Every February, founders of Delaware corporations open the state's franchise tax notice and see a number that looks like a mistake. It usually is not a mistake — it is the Authorized Shares method, which is simply the default calculation, not the amount you actually have to pay. Delaware lets you pay the lesser of two methods, and for most operating companies the other method is dramatically cheaper.

Method one: Authorized Shares

This method taxes what your charter merely permits, whether or not the shares exist. Per the state's published schedule: 5,000 authorized shares or fewer pays the $175 minimum; 5,001 to 10,000 shares pays $250; and each additional 10,000 shares or portion thereof adds $85, up to a maximum of $200,000. The portion rule matters — 20,001 shares pays the same as 30,000. A standard startup charter with 10,000,000 authorized shares owes $85,165 under this method even with nothing in the bank. Source: corp.delaware.gov, How to Calculate Franchise Taxes.

Method two: Assumed Par Value Capital

This method scales with what is real: issued shares and gross assets. The state's own recipe: divide total gross assets (your U.S. Form 1120, Schedule L number) by total issued shares, carrying the result to six decimal places — that is your assumed par. Multiply shares by that assumed par (shares whose actual par value is higher count at their actual par), and the result is your assumed par value capital. The tax is $400 per million or portion of a million, with a $400 minimum and the same $200,000 cap.

Run the startup example: 10,000,000 authorized shares at $0.0001 par, 8,000,000 issued, $2,500,000 in gross assets. Assumed par is $0.3125. Assumed par value capital is $3,125,000. That rounds up to 4 million-or-portion units — a tax of $1,600 instead of $85,165. Same company, same year, both computations straight from the state's rules.

The details that catch people

The annual report itself carries a $50 filing fee on top of the tax, and it is due March 1 for domestic corporations. Miss it and the state adds a $200 penalty plus 1.5% monthly interest. Companies owing $5,000 or more pay in quarterly estimates rather than one payment. If your tax is high enough, note that the $200,000 cap rises to $250,000 for companies the state designates Large Corporate Filers. And if you amended your authorized shares mid-year, the state prorates each period separately — that math is fiddly enough that you should use the state's own calculator for it.

Do the comparison every year

Nothing about the lower method is automatic. When you file the annual report you supply issued shares and gross assets, and that is what triggers the Assumed Par Value Capital calculation. Skip those fields and you pay the Authorized Shares number. We built a free calculator that runs both methods exactly per the state's published rules — it lives at unfoldcfo.com/free/delaware-franchise-tax and nothing you type leaves your browser.

Sources. State of Delaware, Division of Corporations: How to Calculate Franchise Taxes and Annual Report and Tax Instructions (corp.delaware.gov, fetched August 2026); 8 Del. C. Section 503. General information, not tax advice — the state's own portal is authoritative for your filing.