Worried you might need to use all of your cash to pay your Delaware franchise tax bill? Don't worry, it's not as bad as you think! Check out this post and learn how to recalculate your tax liability.
May 29, 2025
If you’re a startup founder incorporated in Delaware, you may have recently opened an email or letter showing a Delaware franchise tax bill for $80,000 or more. Cue the panic.
But here’s the truth:
That number is almost always wrong — and you probably owe less than $1,000.
Let’s unpack the biggest Delaware franchise tax misconception for startups, and how to quickly fix it before overpaying.
Delaware uses two methods to calculate your annual franchise tax:
By default, Delaware applies the Authorized Shares Method, which is based on the total number of shares your company is authorized to issue — not how many you’ve actually issued.
If your startup authorized 10 million or more shares (which is common with YC SAFEs, standard startup templates, or venture-backed cap tables), your tax bill might show up as $75,000–$85,000.
But you can legally and easily reduce your Delaware franchise tax by switching to the Assumed Par Value Capital Method, which factors in your actual gross assets and issued shares.
Here’s how to lower your franchise tax using the correct method:
To calculate using the Assumed Par Value Capital Method, you’ll need:
Tip: If you use QuickBooks or a startup-focused bookkeeper, this data should be easy to pull.
Go to the official Delaware Franchise Tax Calculator and select the Assumed Par Value method.
Enter your total assets and issued shares — most early-stage startups end up owing between $400 and $1,000, the minimum tax amount.
When submitting your Delaware Annual Report, you’ll have the option to select the calculation method.
Make sure to choose “Assumed Par Value Capital Method” manually and input your values to avoid overpaying.
The deadline for Delaware franchise tax filings is March 1 every year. Even if you’re late, it’s worth correcting the method to avoid paying tens of thousands in unnecessary tax.
Many startup founders fall into this trap because:
If you don’t manually recalculate your tax using your actual assets and issued shares, you get stuck with a tax bill that looks more like a Series B company’s — even if you’re pre-revenue.
The minimum tax using the Assumed Par Value Capital Method is $400 (plus a $50 filing fee).
Yes. You can recalculate your tax and file using the correct method any time before the deadline.
You may be eligible for a refund, but you’ll need to contact the Delaware Division of Corporations directly.
As a founder, you have better things to do than decode state tax law. But you can’t afford to ignore it, either — especially when investors expect clean books and smart cash management.
Need help with franchise tax, bookkeeping, or burn tracking?
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