Delaware franchise tax and the $85,165 notice

If Delaware's notice says $85,165, that's the authorised shares figure for ten million shares. Don't pay it. File the report with the two figures and the tax is worked out again. A Delaware LLC is taxed differently, with a flat $400 a year due by 1 June for the year before, and the Delaware LLC tax guide covers it.

Delaware's law sets two ways to work out a corporation's franchise tax, and the corporation pays whichever comes to less. The first counts only the shares its certificate of incorporation authorises. The second, the assumed par value capital method, also uses the shares it has issued and what it owns.

Delaware can only use the second method if the annual report states the company's issued shares and its total gross assets. Without them, the law says the tax is worked out on authorised shares.

Authorised shares are the most the company may issue, set in its certificate. This method charges by that number, however many were issued.

It never goes above $200,000. Startups authorise millions of shares to leave room for an option pool and later investors, which is why this method gives them such large figures. The cap table guide explains the usual split.

This method puts a value on the company's shares from what the company owns, and taxes that value. It needs four figures:

• Total gross assets: the "total assets" on the company's Form 1120 balance sheet, Schedule L, for the year the report covers. That's everything the company owns, before its debts are taken off.
• Issued shares: every share issued, including any the company has bought back and holds, which Delaware calls treasury shares.
• Authorised shares: the number in the certificate of incorporation.
• Par value: the nominal price per share set in the certificate, such as $0.0001. The par value entry explains it.

1. 1

   Find the assumed par

   Divide total gross assets by issued shares, to six decimal places.

2. 2

   Find the assumed par value capital

   Multiply the assumed par by the authorised shares whose par value is below it. Shares with a par value above it count at their own par value instead. Add the two.

3. 3

   Work out the tax

   $400 for each $1,000,000 of assumed par value capital, or part of a million. Below $1,000,000, it's the same share of $400.

4. 4

   Apply the minimum

   The tax for a full year is never less than $400 or more than $200,000.

A young startup owns little, so its assumed par value capital usually stays under a million dollars and the tax lands on the minimum.

Take a Delaware corporation that existed for all of 2026, whose certificate authorises 10,000,000 shares at a par value of $0.0001. It has issued 8,000,000 to its founders. At 31 December 2026 its balance sheet shows total assets of $40,000. Its report for 2026, due by 1 March 2027, works out like this:

The company pays $450. With the same shares, the tax stays at $400 until total assets pass $800,000, then rises $400 for each further million of assumed par value capital, or part of one (here, each further $800,000 of assets). A funding round changes both inputs, adding cash and issuing shares, so work it out again each year.

If the company's total gross assets or issued shares are zero, Delaware asks it to call its franchise tax team on +1 302 739 3073, option 3.

Delaware prints its tax notices in December and sends them to each company's registered agent. Its calculator page says the tax due on the notice is based on the authorised shares method, which needs nothing but the share count in the certificate.

So $85,165 on a ten-million-share notice is what the company owes only if it files without its issued shares and gross assets. Filing them gets the lower figure. The law lets every corporation pay whichever method comes to less.

Delaware takes a corporation's annual report online only. Its filing page is open every day from 8:00 am to 11:45 pm Eastern Time.

1. 1

   Open the report with the file number

   On the Division of Corporations' site, choose Pay Taxes / File Annual Report and enter the company's business entity file number, which Delaware gave it when it was formed.

2. 2

   Fill in the report

   Delaware asks for the nature of the business, the principal place of business, the names and addresses of all the directors, and the name and address of the officer who signs. The president, secretary, treasurer or another proper officer can sign, or a director.

3. 3

   Enter issued shares and gross assets

   Give the issued shares, including treasury shares, and the total gross assets in the spaces for them. These two figures are what let Delaware use the assumed par value capital method.

4. 4

   Check the tax before you pay

   Delaware asks anyone who chooses the assumed par value method when filing to check the tax due against its calculation steps. Check the form shows the figure you worked out. If it still shows the authorised shares figure, stop and call Delaware's franchise tax line before paying.

5. 5

   Pay once

   Pay by Visa, Mastercard, American Express or Discover, or by bank debit (ACH), which Delaware requires for anything over $5,000. Click to pay only once, since Delaware warns that clicking again can charge the card twice. Keep the confirmation.

6. 6

   Or save it and come back

   A saved report gets a session ID that lasts two weeks. Saving doesn't file it, so finish before 1 March.

Delaware's pages don't set out how to undo it, so call its franchise tax line first, on +1 302 739 3073, option 3. What its pages and the law do say:

• An amended annual report costs the same $50 as the report.
• A company with a credit asks for a refund on Delaware's Refund Request Form, signed by the person named on the annual report, sent by email to DOSDOC_FTaxRefunds@delaware.gov or by post to the Division of Corporations in Dover, marked for Franchise Tax.
• The law gives a corporation until 1 March of the second year after the tax year to ask for tax that was wrongly charged or paid to be reduced or refunded. For the tax for 2026, paid in 2027, that's 1 March 2028.

Whether a corrected report on its own turns the overpayment into a credit, Delaware doesn't say. Ask on the call, and keep the confirmation of what you paid.

The first year

A corporation formed in 2026 files its first report and pays its first tax by 1 March 2027. The law prorates the tax of a corporation that didn't exist for the whole year, so one formed in October pays for part of its first year. Its minimums are written for a full year, and Delaware's pages don't say what the online form charges for a part year, so check the figure it shows.

A year unpaid

If a corporation goes a year without paying its franchise tax, or without filing a complete report, Delaware's law makes its charter void, unless Delaware gives it more time.

Gross assets come from a Form 1120 you haven't filed yet

Delaware's figure is the "total assets" on Form 1120's balance sheet, Schedule L, for the year the report covers. The report is due on 1 March and the 1120 on 15 April, so you or your accountant need the year-end balance sheet before the return is finished. Give Delaware the figure that will go on the return.

A small corporation may not fill in Schedule L at all. Form 1120's instructions excuse a corporation with total receipts and total assets under $250,000 from Schedules L, M-1 and M-2, if it ticks "Yes" at Schedule K, question 13. Page 1 still asks for total assets at the year's end, from the company's books, at item D. Delaware's pages don't say which figure such a company should give. Item D is the one we'd expect, but have your accountant confirm it.

The same return carries Form 5472 for each foreign shareholder of 25% or more that the company had dealings with. How a foreign-owned C-Corp is taxed covers the 1120 and what goes with it, and the Form 5472 guide covers the form and its $25,000 penalty, which applies to a corporation too.

Paying from outside the US

Delaware's troubleshooting sheet for its payment screen lists the snags a founder abroad tends to hit. A foreign credit card is one cause of its "Payment services not available" error. A bank debit needs a 9-digit routing number from a US bank. The address takes no more than 22 characters across its first two lines and needs a state, the name fields take 25 characters, and the payment screen refuses full stops, commas, apostrophes, slashes, ampersands, hash signs, dollar signs and hyphens.

So pay from the company's US bank account, by its card or by bank debit, and keep the address short. The US bank account guide covers opening one from abroad.

The notice goes to your registered agent

Delaware sends the December notice to the company's registered agent, not to you. Ask your agent how it passes notices on, and put 1 March in your own calendar. The law sets the due date, so it doesn't move if the notice goes astray.

Delaware calls its LLC tax a franchise tax too, which is why the two get mixed up. They work differently.

If you're still choosing between the two, the LLC or C-Corp tool works through which fits your plans, and the Delaware C-Corporation page sets out what one costs to form and keep. If you've just been issued founder stock that vests, the 83(b) election has a 30-day deadline and no extension.

Every plan puts 1 March and 15 April on your calendar. With annual state compliance, at $149 a year, we file the Delaware annual report and pay the franchise tax for you, at cost.