Delaware Franchise Tax — What to Do Before January 1, 2027

If your Delaware C-corp has a VC-style capitalization table with 10 million or more authorized shares, the default franchise tax bill Delaware sends you in December will often be tens of thousands of dollars. A properly filed Annual Report using the Assumed Par Value Capital method, with Schedule L numbers to support it, brings that same corporation down to a $400 floor — the actual minimum for any Delaware C-corp with a real cap table. Both methods are permitted by statute. The state calculates and shows you the Authorized Shares result by default, and founders who ignore the notice pay that number. Founders who model both methods before March 1 pay the $400 minimum. Everything below is the mechanical picture for the December-through-March 2027 filing window.

Why the December notice looks nothing like the bill you expected

Delaware calculates franchise tax two ways. Corporations pay the lesser of the two — but only if the Annual Report is completed to reflect it.

• Authorized Shares Method — a stepped fee based purely on authorized shares. $175 minimum (5,000 or fewer shares); $250 for 5,001–10,000 shares; above that, $85 for each additional 10,000 shares or portion thereof. Maximum $200,000. A cap table with 10,000,000 authorized shares under this method computes to $85,165. The $175 floor only applies to shell entities. Any real VC-backed cap table clears 10,000 authorized shares and never sees $175 again.
• Assumed Par Value Capital Method — $400 per million (or portion thereof) applied to a computed "assumed par value capital" figure derived from issued shares, total gross assets, and par values. Minimum $400. Maximum $200,000 (or $250,000 if the entity is a Large Corporate Filer — a class listed on a national securities exchange with $750M+ in revenue or assets, which no reader of this post will be). For an early-stage company with modest gross assets, this method typically produces a bill in the $400 to $5,000 range on the same cap table.

The state's form prompts for the numbers required for the Assumed Par Value calculation but does not require you to use it. Filing the report without those numbers means paying the Authorized Shares result by default. That is the source of the $85,000 notice founders see every December.

What we're doing about it: for every Delaware C-corp client, we compute both methods on our own worksheet before filing, then select the lower result. On a typical seed-stage cap table, we file at the $400 minimum. On a later-stage cap table, the bill scales with two inputs — gross assets and the ratio of authorized to issued shares. Worked example: $30M gross assets ÷ 12M issued shares = $2.50 assumed par; × 20M authorized (assuming all authorized shares carry par below $2.50) = $50M assumed par value capital = $20,000 tax. Change the authorized count to 10M and the same company owes $10,000. Change it to 40M and the same company owes $40,000. The authorized-to-issued ratio matters as much as gross assets.

How the Assumed Par Value Capital method actually computes

The steps, in the order Delaware prescribes:

1. Assumed par = total gross assets ÷ total issued shares, carried to 6 decimal places. "Total gross assets" is the "total assets" figure on U.S. Form 1120, Schedule L, for the fiscal year ending in the calendar year of the report.
2. Authorized shares with par below assumed par — multiply by the assumed par.
3. Authorized shares with par greater than assumed par — multiply by their stated par.
4. Assumed par value capital = sum of #2 and #3, rounded up to the next full million if over $1M.
5. Tax = assumed par value capital (in millions) × $400, with a floor of $400.

Two mechanical points that catch people:

• The par-value election matters — but only defensively. A no-par cap table forces you back to the Authorized Shares method, where the large default bills come from. That's the reason VC-style Delaware corporations issue with stated par at all. The common assumption that dropping stated par from $0.001 to $0.00001 lowers the APVC bill is usually wrong: step 2 uses the assumed par (gross assets ÷ issued shares) for any authorized shares whose stated par is below assumed par, so both $0.001 and $0.00001 shares are treated identically as long as assumed par exceeds $0.001, which is almost always. Where stated par matters is step 3 — you want stated par below assumed par so all of your authorized shares get valued at assumed par rather than a higher stated figure. Amending the charter after the fact rarely produces the savings founders expect from it, and it requires a filing plus board and stockholder approvals under most investor rights agreements. Get par right at incorporation; don't amend on the wrong theory later.
• Gross assets is a moving number. A company that closes a $20M Series B on December 20 has $20M more on the December 31 Schedule L than it did two weeks earlier — which flows straight into the calculation. Timing of a raise and how quickly cash is netted against liabilities changes the March 1 bill materially.

The December-through-March 2027 window and what to do in each month

Now through late December: confirm the par value on your current charter and pull the last-filed Annual Report and franchise tax notice. If the last bill was in the tens of thousands and your raises are small relative to your authorized shares, either you filed correctly at the minimum, or you paid the default and an amended-return path may be available (subject to the one-year window discussed below).

December: Delaware's Division of Corporations sends Annual Report and franchise tax information to registered agents (Cogency, CSC, Harvard Business Services, and the like), who then forward it to the company. If the calculated tax is a large Authorized Shares number, do not assume it's the required amount — it's the default. Compute the Assumed Par Value alternative before responding, and get the Schedule L figures into the report before submitting.

By March 1: Annual Report and franchise tax are due for all active domestic corporations. Filing fee: $50 for non-exempt domestic corporations. Filing is done online through Delaware's Division of Corporations portal. Late filing is a $200 penalty plus 1.5% per month interest on tax and penalty. Neglecting to pay the franchise tax for a full year renders the corporation's charter void under 8 Del. C. § 510 — a single year is enough to void the entity, not a pattern of late filings. Reviving a voided charter is expensive and blocks routine corporate actions like signing a term sheet or closing a round.

If the corporation owes $5,000 or more in franchise tax: Delaware requires estimated payments — 40% by June 1, 20% by September 1, 20% by December 1, and the remainder by March 1 with the report. Later-stage companies land here regularly.

Foreign corporations registered in Delaware file a separate Annual Report with the Secretary of State on or before June 30, with a $250 filing fee (a $250 penalty is added if it's not received on time). Different form, different deadline, and easy to miss for a company that reincorporated in Delaware without dissolving its original state entity. Note that the foreign corporation report is not filed through the online portal used for domestic filings — it's submitted by mail or fax on paper forms.

What to do if you already got hit with the default

Delaware permits amended annual reports, but with a hard time limit: one year from the original filing date. Multiple amended reports are allowed within that window. Outside of it, the return is closed and the overpaid tax is gone.

What that means practically: if you're reading this in September 2026 and you paid a defaulted Authorized Shares bill for the 2025 tax year, filed around March 1, 2026 — you're inside the window until approximately March 1, 2027. File the amendment before then. If your defaulted bill was for the 2024 tax year, filed March 1, 2025 — you're already out of time. The tax is gone.

Where the amendment works: correct Schedule L figures and issued-share counts get plugged in, the Assumed Par Value calculation runs against the historical numbers, the amended report is filed for $50, and a refund is requested. Where it doesn't work: any report older than one year, regardless of how large the overpayment was.

We see this most often within the first year or two after incorporation, when a founder set the entity up themselves and paid the default without knowing both methods existed. If you're inside the window, the correction is mechanical. If you're outside of it, the more useful conversation is about the next filing — the one that's still open.

What this looks like on our side

We handle the Delaware Annual Report and franchise tax filing for every Delaware C-corp client on our books — modeled before the December notice arrives, so the answer to "what will we owe Delaware in March?" is already on the schedule by the time the state prompts for it. For founders who inherited a large default bill on a prior report, we run the amended-return analysis and file when the math supports it. It also fits inside how we think about entity structure and year-end planning generally.

Delaware franchise tax is not a difficult area. It's an area with a high default cost and a specific mechanical fix. Founders who plan for it in the fall pay the $400 minimum. Founders who react to the December letter often pay the default. The notice arrives before New Year's; the return is due March 1. That's a conversation worth having in November, not February — reach out via /contact if you want us to look at your cap table before year-end.

David Meyer, CPA, is a Partner at Laléa & Black and leads the firm's Delaware C-corp compliance and founder-facing tax practice for venture-backed startups and their founders.