As the deadline for Delaware franchise tax filing approaches on March 1st, businesses registered in Delaware are preparing to ensure compliance. Unfortunately, many companies end up overpaying this tax due to incorrect filings. It’s easy to ensure you’re not one of them. You can minimize Delaware franchise taxes in 5 minutes.

Delaware franchise taxes are not income taxes but rather annual fees for the privilege of operating in the state. There are two methods for calculating these taxes and Delaware allows you to use the method which yields the lowest tax due (when else is that true?):

  • The Authorized Shares Method calculates tax by using a sliding scale based on the total number of authorized shares. The minimum franchise tax using this method is $175, the highest is $200,000. This method will yield the lowest tax if the company has no par value stock.
  • The Assumed Par Value Capital Method calculates taxes using total assets and shares outstanding, in addition to authorized shares. The minimum franchise tax using this method is $400, the highest is $200,000.

If your company has a high number of authorized shares, try the Assumed Par Value method, it could lead to substantial savings. In a scenario where Company has 300m common shares authorized and issued but only $20m in assets, Assumed Par Value method leads to a tax of $8k, while the Authorized Shares Method leads to a maximum tax of $200k. The difference is real. It’s that easy to minimize Delaware franchise taxes. If you made a mistake on your prior return by not inputting information required to calculate the lower tax due of the two methods, file an amendment immediately. Here is a handy calculator to estimate your DE franchise tax DE Franchise Tax Calculator .

To further reduce your Delaware tax burden, consider the following:

  • Accurately enter cap table entries into your filing and file changes in the cap table with Delaware timely. Delaware should already show the right authorized shares for each class of stock, if it doesn’t please check with your attorneys. If a change in the cap table occurred, Delaware will show the right numbers of authorized shares for each period, before and after the change. You will have to add to the filing the number of outstanding shares for each period and the total assets at end of each period. Paying attention to the periods is important because the tax is calculated separately for each period and any increase in authorized shares only affects taxes as of the date when shares were authorized.


  • Consider filing taxes separately for each entity that rolls up under a parent company. Companies can benefit from doing so because by splitting the assets and shares across the entities that they belong to, they minimize the taxes payable on the parent while paying close to minimum taxes on the subsidiaries.


  • If using the Assumed Par Value Capital Method, remember that it uses assets from the end of the fiscal year. If a company has a fiscal year end that is different from the calendar year end (eg 6/30 fiscal and 12/31 calendar), and had significant increases to cash or other assets between the two periods, inputting the correct assets from 6/30 would yield a much lower tax due.

By taking these simple yet strategic steps, you can maximize savings and ensure your Delaware franchise tax filing is done correctly. The filing takes 5 minutes if your cap table is handy, but if you need help, please reach out to us Contact Us.

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