TEXAS BUSINESS LAW
How to Calculate Delaware Franchise Tax (2026 Rates)
Delaware lets corporations calculate their annual franchise tax two ways — the Authorized Shares Method and the Assumed Par Value Capital Method — and you pay whichever produces the lower bill. The Authorized Shares Method has a $175 minimum; the Assumed Par Value Capital Method has a $400 minimum; both cap at $200,000 for most corporations. Add a $50 annual report fee, and everything is due March 1. LLCs and limited partnerships are simpler: a flat $300 tax by June 1, with no annual report. The catch — and the reason this article exists — is that Delaware’s own bill defaults to the higher method, which is why founders routinely open a notice demanding $85,000 when they actually owe $400.
The Two Calculation Methods for Corporations
Delaware franchise tax is a privilege tax: you owe it for being incorporated in Delaware, regardless of revenue, profit, or activity. Corporations may use either calculation method, and Delaware explicitly permits paying the lower result.
| Authorized Shares Method | Assumed Par Value Capital Method | |
|---|---|---|
| Based on | Number of authorized shares | Gross assets, issued shares, and authorized shares |
| Minimum tax | $175 | $400 |
| Maximum tax | $200,000* | $200,000* |
| Usually cheaper for | Corporations with few authorized shares | Startups with millions of authorized shares but modest assets |
| Used on Delaware’s default bill | Yes | No — you must recalculate yourself |
*Corporations designated as Large Corporate Filers — certain exchange-listed companies with at least $750 million in consolidated revenue or assets — pay a fixed $250,000.
The Authorized Shares Method
The Authorized Shares Method calculates tax purely from the number of shares your certificate of incorporation authorizes — not the shares you’ve actually issued. The 2026 schedule per the Delaware Division of Corporations:
| Authorized shares | Tax |
|---|---|
| 5,000 or fewer | $175 (minimum) |
| 5,001 – 10,000 | $250 |
| Each additional 10,000 shares (or portion) | Add $85 |
| Maximum | $200,000 |
A corporation with 5,000 authorized shares pays $175. A corporation with 100,000 authorized shares pays $250 plus 9 × $85 = $1,015. A corporation with 10,000,000 authorized shares — a standard startup capitalization — pays $250 plus 999 × $85 = $85,165 under this method. That number is real, and it’s what Delaware’s notice will show. Keep reading.
The Assumed Par Value Capital Method
The Assumed Par Value Capital Method bases the tax on your actual financial footprint rather than raw share count. You need three inputs: total gross assets (the figure reported on U.S. Form 1120, Schedule L, for the year ending the calendar year of the report), total issued shares, and total authorized shares with their par values. The calculation:
- Divide total gross assets by total issued shares. The result is your assumed par.
- Multiply the assumed par by all authorized shares with a par value below the assumed par. For any class whose stated par value is higher than the assumed par, multiply those shares by their actual par value instead.
- Add the results. That sum is your assumed par value capital.
- The tax is $400 per $1,000,000 of assumed par value capital, or portion thereof, with a $400 minimum.
Because most startups set par value at a fraction of a cent and hold modest assets relative to their authorized share count, this method routinely turns a five-figure Authorized Shares bill into a few hundred dollars.
A Worked Example (Illustration Only)
The numbers below are hypothetical, for arithmetic only — run your own figures through the calculator on the Delaware Division of Corporations website before filing.
A corporation has 10,000,000 authorized shares at $0.0001 par value, 9,000,000 issued shares, and $1,000,000 in total gross assets.
- Authorized Shares Method: $250 + (999 × $85) = $85,165
- Assumed Par Value Capital Method: $1,000,000 ÷ 9,000,000 issued shares = $0.111 assumed par. $0.111 × 10,000,000 authorized shares = $1,111,111 assumed par value capital. That is one full million plus a portion of a second, so 2 × $400 = $800
The corporation pays $800, plus the $50 annual report fee — not $85,165. Same company, same shares, a difference of more than $84,000 based purely on which method is applied.
Deadlines, Fees, and Penalties
| Entity | What’s due | Deadline | Late penalty |
|---|---|---|---|
| Corporation | Annual report ($50 fee) + franchise tax | March 1 | $200 penalty + 1.5% interest per month on tax and penalty |
| Corporation owing $5,000+ | Quarterly estimated payments: 40% June 1, 20% Sept 1, 20% Dec 1, remainder March 1 | Quarterly | Interest on underpayment |
| LLC / LP / GP | Flat $300 tax, no annual report | June 1 | $200 penalty + 1.5% interest per month |
Missing the deadline costs more than money: a delinquent entity loses its good standing with the state, which can hold up financings, closings, and foreign-state registrations at exactly the wrong moment.
The Trap: Delaware Bills You the Higher Method
When Delaware generates your franchise tax notice, it doesn’t know your gross assets or issued share count — so it calculates the bill using the Authorized Shares Method by default. For a startup with 10 million authorized shares, that means a notice for roughly $85,000. Every year, founders see that number and panic.
Don’t pay it. Log into the Division of Corporations filing portal, enter your issued shares and total gross assets, and the system recalculates under the Assumed Par Value Capital Method automatically. For most early-stage companies the bill drops to $400–$800. The state isn’t making an error; it’s simply billing on the only data it has until you supply the rest.
If you’re weighing where to incorporate in the first place, note that Texas has no Delaware-style per-share franchise tax — the Texas franchise tax is margin-based, and small businesses under the no-tax-due threshold owe nothing. We compare the two states in detail in Should I form my startup in Texas or Delaware?
Frequently Asked Questions
How much is the Delaware franchise tax for an LLC?
A flat $300 per year, due June 1. There is no annual report for LLCs, LPs, or general partnerships, and the amount doesn’t vary with income or assets.
Do I owe Delaware franchise tax if my company made no money?
Yes. It’s a privilege tax on the entity’s existence, not an income tax. A pre-revenue startup and a dormant shell both owe at least the minimum every year they remain incorporated in Delaware.
Why is my Delaware franchise tax bill so high?
Almost certainly because the notice was calculated under the Authorized Shares Method. Recalculate using the Assumed Par Value Capital Method in the state’s filing portal — most startups with high authorized share counts owe only the $400 minimum or slightly more.
Can I just pick whichever method is cheaper?
Yes. Delaware expressly allows corporations to pay using whichever of the two methods produces the lower tax. The state will accept the lower amount as long as the figures you report are accurate.
Reidel Law Firm advises founders and business owners on entity formation, governance, and annual compliance — in Delaware, Texas, and beyond — with transparent flat-fee pricing instead of hourly billing. If you’re deciding where to incorporate or untangling a franchise tax notice, talk to our Texas business law team.
