2025 Delaware Franchise Tax Deadline: Essential Guide for Startups

If your startup is incorporated in the state of Delaware, know that you have some unique tax obligations that are state-specific. In addition to ensuring you file state and federal taxes on time during tax season, an additional caveat is the Delaware Franchise Tax, which requires any corporation in Delaware to pay an annual franchise tax for incorporation in the state. These taxes and annual payments are due by March 1 of each calendar year—and non-compliance can result in steep penalties.

In this post, we’ll dig deeper into how to file, calculate and stay compliant with the Delaware Franchise Tax. Read on to learn more or contact Graphite Financial for help today.

Understanding the Delaware Franchise Tax

Delaware’s Franchise Tax is a mandatory fee for the right to maintain corporate status in the state. It applies to all businesses that are incorporated in Delaware, regardless of their operational location in the state. A good way to think of this franchise tax is as a “due” for doing business in the state. There are benefits to the tax, as the corporations who pay it are kept in “good standing” and are privy to a liability shield.

Failing to pay the franchise tax will result in the removal of your startup’s “good standing” status and the shield of liability that comes with it. This can expose your personal assets to creditors and weaken your startup. If your startup goes more than three years without paying the tax, your startup will be void and have to undergo a revival process to return to business. There are also financial penalties that come with not filing on time or falling behind on payments.

What is the Delaware Franchise Tax?

Simply put, the Delaware Franchise Tax is a tax that must be paid for the right to do business within the state’s borders. Think of it as a fee for incorporation that’s unrelated to your startup’s income, income tax liability, or business operations, such as payroll taxes.

The tax applies to corporations, LLCs, LPs and GPs. Corporations must file an annual report and pay the tax, while LLCs, LPs and GPs are required to pay a flat $300 annual tax (an annual report is not required).

There are two ways to calculate the tax that must be paid. One is via the authorized shares method, which is based on the number of authorized shares. The other is the assumed par value capital method, which is based on gross assets and issued shares. The minimum tax fee is $175 and this applies to minimum stock corporations with 5,000 shares or less. The maximum tax amount is $180,000 and applies mostly to high-stock corporations.

Corporations must also file a corporate income tax return in addition to paying the Delaware Franchise Tax. This return is separate from the Franchise Tax and is based on the corporation’s income.

Delaware Franchise Tax Deadline for 2025

Delaware startups need to meet Franchise Tax deadlines so they don’t lose their “good standing” status and the benefits that come along with it. The deadline is March 1 for corporations and June 1 for LLCs, LPs and GPs.

In addition to losing “good standing” status, financial penalties associated with late filing include a $200 penalty and 1.5 percent interest per month on the unpaid tax.

How to Calculate Your Delaware Franchise Tax

There are two methods for calculating the Delaware Franchise Tax if your startup is a corporation. (Remember, if your startup is an LLC, LP or GP, the tax is a $300 flat fee tax.) The two methods are the authorized shares method and the assumed par value method. Here’s a closer look at each of these methods:

• Authorized shares method: There’s a minimum $175 tax for up to 5,000 shares. While startups are unlikely to have a greater number of shares, the tax amount increases the higher the shares get. For instance, corporations with 5,001 to $10,000 shares must pay a tax of $250 and it’s an additional $75 for each additional 10,000 shares. The maximum tax amount is $180,000 for corporations.
• Assumed par value method: The assumed par value method is calculated by following this formula:
• Assumed Par Value per Share = Total Gross Assets/Total Issued Shares

How to File and Pay the Delaware Franchise Tax

Here’s a closer look at how to file and pay the Delaware Franchise Tax, whether your startup is a corporation or LLC, LP or GP:

• Filing must be done online through the Delaware Division of Corporations panel.
• Corporations must submit the annual report and their tax payment by the March 1 deadline.
• LLCs, LPs and GPs only need to pay the $350 tax by the June 1 deadline. An annual report is not required.
• Payment options can be done via credit card, ACH transfer and check.

It’s also important that all data is correct to avoid errors, especially for startup corporations that need to file an annual report with their tax payment.

Penalties for Late Filing

There are both financial penalties and standing penalties that come with failure to meet the Delaware Franchise Tax deadline.

From a financial standpoint, it’s a $200 late fee for filing late and 1.5 percent interest per month on any unpaid taxes.

From a standings standpoint, startups lose “good standing” status, which impacts their legal protections, their ability to secure funding and their ability to renew their business license after some time.

Tips for Staying Compliant

The best way to stay compliant with the Delaware Franchise Tax and avoid some of the penalties that result in late filing is to plan accordingly.

• Know when your deadline is based on your startup. The deadline is either March 1 or June 1.
• Don’t wait until the last minute—file early to avoid potential delays or last-minute issues that must be addressed.
• Seek professional help from a professional accountant like Graphite to ensure compliance and on-time filing/payment.
• If you’re a corporation, calculate what you owe using the more cost-effective of the two methods.

How Graphite Financial Can Help

As experts in all things accounting and franchise tax filing, Graphite is here to help your startup stay compliant with tax requirements. We also offer startup corporations assistance with their annual report preparation that must be filed along with payment on March 1 and can help select the best tax calculation method. Contact us today for more information and to schedule a free consultation.

Stay Ahead of the 2025 Deadline

Make sure you know what’s expected of your startup when it comes to the Delaware Franchise Tax, especially if your startup is incorporated. Work with financial experts to help calculate what your startup owes and to help with your annual filing.

Need Help Filing Your Delaware Franchise Tax?

Need help with your Delaware Franchise Tax? Contact the experts at Graphite today to take advantage of our tax compliance and annual report preparation service offerings. We’ve helped hundreds of startups with their tax filings and other financial matters and can help do the same with you. Contact us today for more information and to schedule a consultation.

FAQs

Who needs to pay the Delaware Franchise Tax?

All corporations, including Delaware C corporations, LLCs, LPs and GPs that do business in the state of Delaware must pay the Delaware Franchise Tax.

What’s the difference between Authorized Shares and Assumed Par Value methods?

The authorized shares method is based on the total number of shares, while the assumed par value method is calculated by dividing gross assets by total issued shares.

Can I amend my filing after submission?

Delaware accepts amended filings up to a year after the initial filing.

What happens if I don’t pay the tax?

If you don’t pay the tax, you’ll face penalties in a few different ways. Financially, there’s a $200 late fee for filing late and 1.5 percent interest per month on any unpaid taxes. You’ll also lose “good standing” status, which impacts your legal protection, your ability to secure funding and your ability to renew your business license.

Are there exemptions for nonprofits or startups?

No, every Delaware-based corporation must pay the tax.