Delaware Franchise Tax

What is Delaware Franchise Tax?

Delaware franchise tax is a tax imposed by the state of Delaware on businesses for the privilege of being incorporated in the state. 

Example of Delaware Franchise Tax

A Delaware corporation with authorized shares may pay a franchise tax based on the number of shares or the company’s assets.

How To Calculate Delaware Franchise Tax

Use the authorized shares method or the assumed par value capital method. The Delaware Division of Corporations provides calculators for accurate estimation. 

  • Special Tip: Regularly review your company’s capitalization structure to optimize franchise tax payments.

  • Advantages 
    • Allows companies to incorporate in a business-friendly state. 
    • Provides access to Delaware’s well-established legal framework. 
    • Often offers lower tax rates compared to other states.
  • Disadvantages 
    • Additional tax burden for businesses. 
    • Requires careful calculation to avoid penalties.


Why do companies incorporate in Delaware?

Delaware offers favorable business laws and tax structures.

The company may face penalties, interest, and loss of good standing.

Annually, typically by March 1st. 

Yes, by using the method that results in the lower tax payment.


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