Delaware franchise tax assumed par value method: cut the 2026 bill
Delaware's default calculation can bill a 10-million-share startup $85,165. The assumed par value capital method usually drops it to $400. Here is the recalculation.
Delaware franchise tax assumed par value method: cut the 2026 bill
The Delaware franchise tax assumed par value method divides total gross assets by issued shares to set an assumed par value, then charges $400 per $1 million of assumed par value capital, subject to a $400 minimum (Delaware Division of Corporations). For most startups it replaces a five-figure default notice with the minimum.
Delaware shows you the bigger number first. That is not a bill, it is a default.
Delaware gives corporations two calculation methods and instructs you to use the one that produces the lesser tax (Delaware Division of Corporations). The figure on your notice is computed under the Authorized Shares Method, which counts nothing but the shares your charter authorized. Nothing on the notice tells you the second method exists.
The gap between the two is the entire article. A standard startup charter authorizes 10 million shares, which prices out at $85,165 under the default schedule (Delaware Division of Corporations). Recalculated the other way, a company with a normal seed-stage balance sheet usually lands on the $400 minimum (Delaware Division of Corporations).
How to reduce Delaware franchise tax with the assumed par value capital method
Seven steps, every one of them running off numbers you already have.
- Pull total gross assets. Delaware defines this as the total assets reported on U.S. Form 1120, Schedule L, for the fiscal year ending in the report year (Delaware Division of Corporations).
- Pull all issued shares, including treasury shares. The annual report asks for issued shares, not authorized shares, and treasury shares are counted (Delaware Division of Corporations).
- Divide gross assets by issued shares. The quotient is your assumed par value (Delaware Division of Corporations).
- Apply that assumed par value to your authorized shares, using the relevant par-value treatment for each class, to reach assumed par value capital (Delaware Division of Corporations).
- Round up to the next whole million and multiply by $400. The rate is $400 per $1 million or portion of $1 million of assumed par value capital, with a $400 floor and a $200,000 ceiling (Delaware Division of Corporations).
- Compare both results and file the lesser one. This is not a loophole. Delaware tells corporations to use the method that results in the lesser tax (Delaware Division of Corporations).
- File the annual report online and pay before March 1, including the $50 annual report fee for a non-exempt domestic corporation (Delaware Division of Corporations).
Why the Delaware franchise tax for a startup defaults to five figures
The Authorized Shares Method taxes a number that has nothing to do with the size of your company.
| Authorized shares | Tax under the Authorized Shares Method |
|---|---|
| 5,000 or fewer | $175 |
| 5,001 to 10,000 | $250 |
| Each additional 10,000 shares or portion thereof | $85 |
Rates from Delaware Division of Corporations.
Run a 10-million-share charter through that schedule. The first 10,000 shares cost $250. The remaining 9,990,000 shares split into 999 blocks of 10,000, each charged $85, which is $84,915. The total is $85,165 for a company that may have zero revenue and four employees.
| Authorized Shares Method | Assumed Par Value Capital Method | |
|---|---|---|
| Inputs | authorized shares only | gross assets plus issued shares, including treasury |
| Rate | $85 per additional 10,000 shares | $400 per $1 million of assumed par value capital |
| Minimum | $175 | $400 |
| Maximum | $200,000 | $200,000 |
Minimums and maximums from Delaware Division of Corporations, rates from How to Calculate Franchise Taxes. The $200,000 ceiling applies to both methods, except that a Large Corporate Filer can owe $250,000 (Delaware Division of Corporations).
The cap-table inputs the Delaware franchise tax calculator actually needs
Collect these six items before you open the filing, not during it.
- Authorized shares by class: straight from your certificate of incorporation, not from your cap-table software's summary view.
- Issued shares including treasury shares: the report requires issued shares and counts treasury shares (Delaware Division of Corporations).
- Total gross assets: total assets on U.S. Form 1120, Schedule L, for the fiscal year ending in the report year (Delaware Division of Corporations). This is a tax-return line, not your bank balance.
- Par value for each class: the assumed par value calculation applies par-value treatment class by class (Delaware Division of Corporations).
- Fiscal year end: it determines which Schedule L belongs in this year's report.
- Any mid-year stock or par value change: Delaware may require separate issued-share and gross-asset figures for each period and prorates the tax by the number of days each structure was in effect (Delaware Division of Corporations).
Delaware franchise tax deadline: March 1 and the penalty math
Domestic corporations file the annual report and pay the prior year's tax online on or before March 1 (Delaware Division of Corporations).
| Item | Amount |
|---|---|
| Annual report fee, non-exempt domestic corporation | $50 |
| Late filing penalty | $200 |
| Interest on tax and penalty | 1.5% per month |
Figures from Delaware Division of Corporations.
Owing $5,000 or more puts you on installments instead of a single payment. Delaware takes 40% by June 1, 20% by September 1, 20% by December 1, and the remainder by March 1 (Delaware Division of Corporations). Most companies that recalculate correctly never see that schedule, because the minimum is $400.
When the assumed par value method does not help
A low issued-to-authorized ratio can flip the answer, so run both numbers before you assume the second method wins. Assumed par value is gross assets divided by issued shares, and the result is then applied across authorized shares (Delaware Division of Corporations). Authorize 10 million shares and issue very few of them, and you spread a large assumed par value across the full authorized count.
Two other cases to check. A mid-year change to stock or par value forces period-by-period figures and day-count proration (Delaware Division of Corporations). And both methods described here are corporation calculations: if you formed an LLC or an LP rather than a corporation, this arithmetic does not apply to you.
What changes after you raise
The assumed par value method scales with your balance sheet, so a priced round moves this number. Gross assets are the total assets line on Form 1120, Schedule L (Delaware Division of Corporations), and round proceeds sit in it. At $400 per $1 million of assumed par value capital (Delaware Division of Corporations), a company holding real cash climbs off the minimum. Budget for it in the filing that follows the raise, not the one before.
Delaware corporations are the traditional structure for US startups seeking venture financing (Cooley GO), so clear the rest of the file in the same sitting: Delaware C-corp setup covers formation, the 83(b) election deadline is the one filing with no cure once missed, and IP assignment for your first hire is the diligence item that stalls term sheets.
Most founders fixing this bill are heading into a round anyway. Causo matches you to the investors most likely to fund your stage and sector and drafts the outreach, so the raise takes weeks rather than a quarter.
FAQ
Why is my Delaware franchise tax so high? Delaware calculates your notice under the Authorized Shares Method, which charges $250 for the first 10,000 authorized shares and $85 for every additional 10,000 shares or portion thereof (Delaware Division of Corporations). A charter authorizing 10 million shares produces $85,165 on that schedule. The number reflects your charter, not your revenue, and it is not necessarily the amount you owe.
How do I lower my Delaware franchise tax? Recalculate under the Assumed Par Value Capital Method and file whichever result is lower, which is what Delaware instructs corporations to do (Delaware Division of Corporations). You need total gross assets and all issued shares including treasury shares. Most early-stage companies land on the $400 minimum for that method (Delaware Division of Corporations).
What is the assumed par value capital method in Delaware? It is Delaware's alternative franchise tax calculation for corporations. Divide total gross assets by issued shares to get an assumed par value, apply that value to authorized shares with the relevant par-value treatment, then pay $400 per $1 million or portion of $1 million of assumed par value capital (Delaware Division of Corporations). The minimum is $400 and the maximum is $200,000 (Delaware Division of Corporations).
When is Delaware franchise tax due? Domestic corporations file the annual report and pay the prior year's franchise tax online on or before March 1, and late filing triggers a $200 penalty plus 1.5% interest per month on the tax and penalty (Delaware Division of Corporations). Corporations owing $5,000 or more pay in installments instead: 40% by June 1, 20% by September 1, 20% by December 1, and the remainder by March 1 (Delaware Division of Corporations).
What is the minimum Delaware franchise tax for a corporation? The minimum is $175 under the Authorized Shares Method and $400 under the Assumed Par Value Capital Method, and the maximum is $200,000 under both, except that a Large Corporate Filer can owe $250,000 (Delaware Division of Corporations). The $50 annual report fee for a non-exempt domestic corporation is charged on top of the tax (Delaware Division of Corporations).
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