Delaware franchise tax: A complete guide for businesses (2025)

If you run a business in Delaware, you can’t afford to ignore the Delaware franchise tax. 

Delaware is a top choice for incorporation thanks to its business-friendly laws and tax benefits. But with that privilege comes responsibility: Pay tax.

The Delaware franchise tax isn’t based on your company’s revenue or profit. It’s simply the annual fee of being incorporated in the state.

Whether you run a startup, an LLC, or a corporation, you need to know how to calculate your tax, when it’s due, and how to file it.

Let’s break it down.

1. What is the Delaware franchise tax?

1.1. What is the Delaware franchise tax?

The Delaware franchise tax is a fee imposed by the state of Delaware for the right or privilege to own a Delaware company.

You can think of the Delaware franchise tax as a membership fee for incorporating in the state. 

It’s not an income tax and doesn’t depend on your business activity or earnings. 

Despite the name, it has nothing to do with owning a franchise.

It’s simply the price you pay for the privilege of being incorporated in Delaware—and keeping your company in good standing.

1.2. Who needs to pay it? (LLCs, Corporations, Startups)

If your company is incorporated in Delaware, you must pay franchise tax, no matter where you do business.

Corporations – Every for-profit corporation in Delaware, including C Corps and S Corps, must pay franchise tax. Even if your company earns zero revenue, the tax still applies.

1. LLCs – Delaware Limited Liability Companies (LLCs) are required to pay an annual franchise tax to maintain their status;
2. Startups – Many startups incorporate in Delaware for its investor-friendly laws. Startups must also pay franchise tax;
3. Other entities, such as general partnerships (GPs), limited partnerships (LPs), and limited liability partnerships (LLPs), are also subject to franchise tax.

 Exempt entities – Some organizations, like charities, civic groups, and religious organizations, don’t have to pay franchise tax. However, they must still file an annual report and pay a filing fee.

1.3. Why does Delaware charge a franchise tax?

Incorporating in Delaware comes with major benefits—business-friendly laws, opportunity for capital raising, strong legal protections, and the renowned Court of Chancery.

But those benefits come at a price.

Delaware uses this tax to fund its pro-business legal system and ensure its corporate laws remain the gold standard.

In return, companies get a flexible legal framework and efficient corporate governance structures.

2. How to calculate the Delaware franchise tax?

2.1. Overview of franchise tax calculation

Your Delaware franchise tax depends on your business entity type and your calculation method. Choosing the right method can save money, so understanding the process is crucial.

For corporations, Delaware offers two calculation methods:

✅ Authorized Shares Method (Default) – Based on the total number of shares your company is authorized to issue.

✅ Assumed Par Value Capital Method – Based on your company's total gross assets and issued shares.

For LLCs and Partnerships, the tax is a flat fee rather than a calculated amount.

2.2. How to calculate Delaware franchise tax for corporations?

Delaware corporations have two ways to calculate their franchise tax, and you get to pay the lower amount 

Authorized shares method

The authorized shares method calculates the franchise tax based on the total number of shares a corporation is authorized to issue, regardless of how many shares are issued or outstanding. 

For example, a corporation with 6000 shares must pay USD 250. 

The maximum tax under this method is USD 200,000. 

This method can result in a higher tax for corporations with a large number of authorized shares, especially if those shares have a low par value. 

Companies with many authorized but unissued shares must carefully consider this method, as it may lead to significant tax liabilities.

This method is often chosen by corporations looking for predictability in their tax obligations, as the tax amount will not fluctuate with changes in the company's financial performance.

Additionally, if your corporation has shares without par value, you must use the authorized shares method.

Assumed par value capital method

This method is more complex and depends on your total gross assets and issued shares.

To use this method, you need to provide figures for all issued and outstanding shares and total gross assets as reported on US Form 1120, Schedule L (Federal Return)

This method can result in lower tax liabilities for corporations with a high asset base compared to their issued shares. 

It requires a more detailed understanding of the corporation's financial statements, but can be advantageous for companies with significant assets.

By using this method, corporations can potentially reduce their franchise tax burden if their asset-to-share ratio supports a more favorable calculation.

To calculate your franchise tax using the assumed par value capital method, you can follow the process below:

Divide your total gross assets by your total issued shares to get the assumed par value.

1. Multiply your assumed par value by the number of authorized shares with a par value lower than the assumed par;
2. Add the total par value of all shares with a par value higher than the assumed par;
3. Round the sum up to the next million and divide by $1,000,000;
4. Multiply by $400 to get your franchise tax.

The minimum tax under this method is $400 and and the maximum tax is $200,000.

For example, a corporation with 500,000 authorized shares at $1.00 par value and 200,000 authorized shares at $3.00 par value, with gross assets of $800,000 and issued shares totaling 350,000:

1. Calculate the assumed par value: $800,000 ÷ 350,000 = $2.285714;
2. Multiply assumed par by shares with a lower par value: $2.285714 × 500,000 = $1,142,857;
3. Multiply shares with a higher par value by their par value: 200,000 × $3.00 = $600,000;
4. Find the assumed par value of capital: $1,142,857 + $600,000 = $1,742,857;
5. Calculate the tax: You round up $1,742,857 to $2,000,000, and then, 2 × $400 = $800 tax.

Large corporate filer

If your corporation meets both of these conditions:

• Listed on a national securities exchange;
• Reports $ 750 M+ in revenue or assets, with at least $250M in both categories.

Your company must pay an annual tax of USD 250,000.

2.3. How to calculate Delaware franchise tax for LLCs?

For Delaware LLCs, the franchise tax is more straightforward compared to corporations.

Unlike corporations, LLCs don’t have multiple calculation methods to choose from.

Instead, they pay a flat annual fee, making compliance hassle-free.

The Franchise Tax for a Delaware limited liability company (LLC) or Delaware limited partnership (LP) is a flat annual rate of $300.

For Limited Liability Partnerships (LLPs), the fee is $200 per partner.

2.4. Minimum and maximum Franchise Tax amounts

Delaware structures its franchise tax to balance fairness and sustainability.

The state ensures that all businesses contribute without an excessive tax burden.

This structure keeps tax obligations manageable for small businesses while ensuring larger corporations contribute appropriately.

3. Delaware franchise tax due dates & deadlines

The Delaware annual report and franchise tax payment for corporations are both due by March 1st.

For LLCs, Limited Partnerships, and General Partnerships formed in Delaware, the annual franchise tax is due by June 1st

Under any circumstances, if you fail to pay your Delaware franchise tax on time? It’ll cost you.

• $200 penalty for late filings.
• 1.5% monthly interest on unpaid taxes and penalties.
• No Certificate of Good Standing if taxes are overdue.
• Failure to pay for over a year? Your charter will be voided, meaning your company loses its legal status.

To avoid penalties, you must set reminders, use online payment tools (TurboTax, for example), and file on time.

Staying compliant keeps your business in good standing with Delaware.

4. How to pay the Delaware franchise tax online?

All U.S.-based companies must pay their franchise tax and file their annual report online. You can pay using  Electronic Check (ACH) or any major credit card.

To fill out the annual report and pay the franchise tax, you must go to the Delaware Secretary of State Franchise Tax Portal: https://corp.delaware.gov/paytaxes/ .

4.1. Step-by-step guide to file and pay Delaware franchise tax

Filing and paying your Delaware franchise tax is a straightforward process if you follow these key steps:

• 1

  Step 1: Log in to the Delaware franchise tax portal

• 2

  Step 2: File your annual report

• 3

  Step 3: Calculate your franchise tax

• 4

  Step 4: Pay your franchise tax

4.2. Estimated franchise tax payments

If your franchise tax is $5,000 or more, you must pay in quarterly installments

5. Who needs to download and submit franchise tax forms on paper?

Domestic Delaware corporations and LLCs can file and pay tax online through the Delaware Division of Corporations website.

However, foreign corporations (corporations formed outside of Delaware but registered to do business in Delaware) cannot file online. 

To pay tax, the foreign corporations must print it out and mail or fax it to the state of Delaware with the payment.

6. How can Global Link Asia Consulting help you calculate and pay the Delaware franchise tax?

Paying Delaware franchise tax is an important requirement for businesses. But it’s not just about following the rules—understanding your tax can help you save money and avoid fines. 

We can make the process easy. We help you calculate the exact amount, file your tax on time, and stay compliant with Delaware regulations. 

Global Link Asia Consulting has 10 years of experience helping international entrepreneurs succeed in the U.S. market.

We provide professional services to help businesses set up, grow, and stay compliant with U.S. regulations. With our support, you can build a strong foundation and expand with confidence.

• Register a company in the U.S in your chosen state;
• Open a corporate bank account in the U.S with a 99% success rate;
• Choose the right company types for tax optimization in the U.S;
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• Support to open, authenticate, and manage Stripe Paypal Business in Singapore, Hong Kong, and the U.S;
• Handle all your tax accounting needs, timely annual filings, auditing, and more.

7. FAQs about franchise tax in Delaware

We offer a comprehensive range of accounting and tax services for US companies. Our services include:

• Tax Consulting for LLC companies.
• Monthly/Annual Tax Accounting services in accordance with US GAAP.
• QuickBooks Consulting and Licensing.
• Corporate Income Tax Return Preparation.
• Sales Tax Return Preparation.

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