Question 1

Why is my Delaware franchise tax bill so high ($75,000+)?

Accepted Answer

Delaware defaults to the Authorized Shares Method when issued shares and gross assets fields are left blank. This method taxes all authorized shares (including millions reserved for future use), resulting in bills of $75,000 or more for typical startups with 10-15 million authorized shares.

Question 2

How can I reduce my Delaware franchise tax from $75K to $400?

Accepted Answer

Fill in the Issued Shares and Gross Assets fields on your annual report. This allows Delaware to use the Assumed Par Value Capital Method, which bases tax on your actual economic footprint rather than authorized shares. Most startups pay only $400-$600 using this method.

Question 3

What is the Assumed Par Value Capital Method?

Accepted Answer

The Assumed Par Value Capital Method calculates franchise tax based on gross assets divided by issued shares to determine assumed par value, then multiplies by authorized shares and applies $400 per $1 million of capital. This typically results in much lower taxes than the Authorized Shares Method.

Question 4

When is Delaware franchise tax due?

Accepted Answer

For most corporations, Delaware franchise tax is due March 1 of each year, covering the prior tax year. Missing the deadline results in penalties and 1.5% monthly interest that compounds over time.

Question 5

What are the penalties for late Delaware franchise tax filing?

Accepted Answer

Late filing incurs a $200 penalty plus 1.5% monthly interest on the unpaid tax amount. Interest compounds monthly, so unpaid balances can grow significantly over time. Additionally, your company may lose good standing status.

Question 6

What is the annual report fee for Delaware corporations?

Accepted Answer

Delaware corporations pay a $50 annual report fee in addition to the franchise tax. LLCs pay a flat $300 annual tax due June 1. Corporation franchise tax is due March 1 with a minimum of $175 (Authorized Shares) or $400 (Assumed Par Value).

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