Delaware charges an annual franchise tax on every LLC and corporation formed there, and the amount you owe depends on your entity type and, for corporations, which calculation method you use. This guide walks through both, plus the deadlines and penalties you need to plan around.
What Delaware franchise tax is
Franchise tax is not an income tax. Delaware charges it for the right to exist as a Delaware entity, so you owe it even if your business had no revenue, no US operations, or a loss for the year. It is separate from any federal tax filings you have to make, and separate from your state's ongoing report obligations if you also registered to do business elsewhere.
LLCs: a flat annual fee
Delaware LLCs pay a flat franchise tax. As of this writing that amount is $300 per year, due by 1 June regardless of your formation date, revenue, or fiscal year end. There is no annual report to file alongside it for an LLC, just the payment itself.
Because the fee is flat, there is nothing to calculate. Your job is to make sure it gets paid on time, every year, for as long as the LLC exists. Rules and amounts can change, so check Delaware's Division of Corporations site before you pay if it has been a while since your last filing.
Corporations: two calculation methods
Corporations have it more complicated. Delaware gives you two ways to calculate the tax, and you can pick whichever produces the lower bill. The two methods are the authorized shares method and the assumed par value capital method.
The authorized shares method looks only at how many shares your corporation is authorized to issue in its charter. It does not look at your actual assets or how many shares you have issued. This means a startup that authorizes a very large number of shares, which is common advice for future fundraising flexibility, can end up with a surprisingly high bill under this method even if the company is small and pre-revenue.
The assumed par value capital method looks at your total gross assets alongside your issued shares and their par value. It generally produces a much lower bill for most early stage companies, especially ones that authorized a large share count for future flexibility but currently have modest assets. Most startups end up choosing this method once they realize how much cheaper it usually is.
Here is a qualitative comparison to help you understand the tradeoff:
| Factor | Authorized shares method | Assumed par value capital method |
|---|---|---|
| What it looks at | Number of authorized shares | Total gross assets and issued shares |
| Typical result for startups | Often much higher | Usually much lower |
| Best suited for | Corporations with a small authorized share count | Corporations with a large authorized share count and modest assets |
| Calculation complexity | Simple | Requires more inputs |
You do not have to guess which is better. When you file, you calculate both and pay the lower of the two. If your bill looks unexpectedly high, it usually means the authorized shares method was applied by default rather than the assumed par value method, so it is worth checking both figures before you pay.
Deadlines and penalties
Delaware LLCs owe their flat fee by 1 June each year. Delaware corporations file their annual report and pay franchise tax by 1 March each year. Missing either deadline triggers a penalty plus interest that accrues on the unpaid balance, and the exact penalty and interest figures can change, so confirm the current numbers on Delaware's Division of Corporations site before you assume anything.
Beyond the financial penalty, a corporation or LLC that stays delinquent for long enough risks losing good standing with the state. That can complicate opening bank accounts, closing fundraising rounds, or dissolving the entity cleanly later. It is one of the more common problems we see founders discover only when a bank or investor asks for a certificate of good standing and the entity cannot produce one.
Why this trips founders up
A few patterns come up again and again. First, founders forget that franchise tax is due even in a year with zero revenue, because it feels unrelated to income. Second, corporations authorize a large number of shares on the advice of a lawyer or template, then get an alarming bill under the authorized shares method without realizing they could recalculate under the assumed par value method and pay far less. Third, founders who registered their Delaware entity to also do business in another state sometimes confuse Delaware's franchise tax deadline with that other state's annual report deadline, and miss one of the two.
None of these are hard to avoid once you know the pattern, but they are easy to miss if nobody flags the date or the calculation choice for you.
Where PowerLaunch fits
If you are on the Run or Scale plan, annual state report filing is handled for you, and you get a licensed tax professional consultation as part of the service. That consultation is a good place to confirm which franchise tax calculation method applies to your corporation and to make sure the right deadline is on your calendar before it becomes a penalty. If you are only on the Launch plan, you are responsible for tracking and paying franchise tax yourself, so mark 1 June or 1 March on your calendar the day your entity is formed.
Whatever plan you are on, if a formation error on our side caused a downstream tax problem, we correct it at our cost under our guarantee. State fees and state taxes themselves, including franchise tax, are never refundable, since that money goes straight to Delaware and not to us.
What to do next
If you already have a Delaware LLC or corporation and want help tracking this deadline alongside your other filings, book a free 20-minute consultation at powerlaunch.solutions/book and we will walk through your specific situation. If you are still forming your entity and want franchise tax handled correctly from day one, start at powerlaunch.solutions/signup and choose the Run or Scale plan so annual state filings are covered as part of the service.
