Delaware Franchise Tax

Overview

The Delaware franchise tax is a fee that companies pay to Delaware each year to keep their legal status. It’s not a tax on profits — it’s a cost of being incorporated there. The state collects billions in fees from this system every year.

Many startups incorporate in Delaware because VCs require it, as Delaware’s business-friendly laws make it easier for investors to navigate legal issues.

Every company incorporated in Delaware must pay the franchise tax and file an annual report, even if it doesn’t do business there.

Some founders assume they don’t need to pay if they have no revenue, no activity, or operate in another state — but the obligation exists regardless unless you formally dissolve the company.

The franchise tax and annual report are due March 1^st every year and must be completed together.

If tax amount is ≥ $5,000, payment and filing is required every quarter.

Missing the deadline results in a $200 late fee plus 1.5% interest per month on the unpaid tax.

After months of nonpayment, Delaware could classify the company as “not in good standing”. And if multiple payments are missed, they may shut it down completely.

Finta helps customers with this entire process.

Get Delaware File Number

If you don’t know your company’s Delaware File Number yet, go to the Delaware Name Lookup page, enter your company’s legal name in Entity Name and click Search.

Get the File Number from the results.

Go to input page

Go to the filing page, click Click Here to Pay Taxes / File Annual Report, enter your Delaware File Number, solve the captcha, then click Continue.

In the correct tax year row click File Annual Report. (If it says File Amended Annual Report then it’s already been filed.)

Enter cap table info

In the Stock Information table enter:

Issued shares: issued amount for this share class from cap table.
Gross assets: assets or cash balance at the end of last year.
Asset date: “12/31/yyyy”. (yyyy = tax year you’re filing for.)

Recalculate tax amount

The Amount Due will likely show an insanely high number. It’s ok - click Recalculate Tax and the amount should be much lower.

Check the section below to see how this is calculated.

Enter Directors info

Complete the remaining sections on this page:

Principal place of business: enter your headquarters address.
Officer information: typically this is the CEO. Enter their info.
Directors information:
- Enter Total Number of Directors: enter the number of directors. Typically this is the founders.
- Click Enter Directors Info, then complete the information for each row.
Checkbox: certify to Terms and conditions
Last row: entering addresses three times isn’t enough, just one more time.
Click Continue Filing

Proceed to payment

On the confirmation page, scroll to the bottom and click Proceed to Payment

Enter your payment information and click Submit.

If tax amount is ≥ $5,000 then only ACH is accepted.

If ACH and you have whitelist/blocking, add Delaware’s ID: 1225092400 first.

Keep confirmation records

Download and keep the payment and filing confirmation.

You’re all set!

Lowest amount is $400 plus $50 filing fee. This is the general methodology:

\left\lceil \frac{\text{Assets} \div \left(\frac{\text{Outstanding}}{\text{Authorized}}\right)}{\$1,000,000} \right\rceil \times \$400 + \$50

To calculate yours, copy this formula: =CEILING(Assets / (Outstanding / Authorized) / 1000000) * 400 + 50 And replace the variables:

Authorized: total shares authorized
Outstanding: total shares outstanding
Assets: assets or cash at the end of last year

Tax Compliance

Best Practices

Delaware Franchise Tax

Overview

Tax Compliance

Best Practices

​Overview

Overview