Delaware franchise tax explained: due date, methods, minimums, and penalties

All active domestic Delaware corporations generally file an annual report and pay franchise tax for the prior year on or before March 1. Delaware requires the domestic corporation annual report to be filed online. The obligation applies because the company is incorporated in Delaware, even if it conducts its operating business elsewhere.

Delaware provides the Authorized Shares Method and the Assumed Par Value Capital Method. The Authorized Shares Method is based principally on the number of authorized shares. The Assumed Par Value Capital Method uses issued shares, authorized shares, and total gross assets from the corporation's federal income-tax balance sheet or equivalent financial information.

The methods can produce dramatically different amounts for a startup with a large authorized share count. That is why finance teams should calculate both permitted methods when appropriate rather than paying an unexpectedly large assessment without review.

Delaware currently states that the minimum franchise tax is $175 under the Authorized Shares Method and $400 under the Assumed Par Value Capital Method. Non-exempt domestic corporations also have a $50 annual-report filing fee. Maximum tax rules and special rules for Large Corporate Filers apply.

Delaware states that taxpayers owing $5,000 or more pay estimated franchise tax in installments: 40% due June 1, 20% due September 1, 20% due December 1, with the remainder due March 1 following year-end. A company crossing that threshold should not treat March 1 as its only Delaware tax date.

Delaware currently lists a $200 penalty for a domestic corporation that does not file the completed annual report by March 1, plus interest of 1.5% per month on unpaid tax and penalty. If you receive a solicitation that looks like a Delaware annual report invoice, verify that it is from the state or your registered agent; Delaware publishes warnings about deceptive solicitations.