Delaware franchise tax math: the June 1 deadline, line by line

Every Delaware entity owes franchise tax to the state once a year. It is not a tax on income, profit, or revenue — it is a privilege fee for keeping the entity in good standing. You owe it whether the company made one dollar or one hundred million, whether you operate in Delaware or have never set foot in the United States. The deadline is June 1, the penalties for missing it are real, and the math for C-Corps is where almost every founder leaves money on the table.

This is the full breakdown: how the two entity types are calculated, the election that saves startups 80 to 95 percent of their bill, the penalty cadence if you miss the deadline, and the five operational steps to get it right.

Delaware LLCs: a flat $300, due June 1

For Delaware LLCs (and LPs), the math is mercifully simple. Every LLC owes a flat $300 annual franchise tax. There is no calculation, no method election, no scaling formula. You pay $300. You pay it by June 1 every year. That is the whole rule.

What founders miss is the penalty side. If June 1 passes without payment, the state assesses a $200 late penalty plus 1.5 percent interest per month on the unpaid balance. That compounds. An LLC that ignores the bill for a year owes the $300 base, plus $200 in penalties, plus 18 percent in accrued interest — and the entity loses Good Standing status, which can block bank account openings, contract signings, and most material business operations.

Delaware C-Corps: two methods, and a default that overcharges

For C-Corps, franchise tax is calculated by one of two methods. Both are legal. Delaware bills you using the higher one by default. You have to actively elect the lower one to get the lower bill — and most startups never do.

Method 1 is the Authorized Shares Method. Method 2 is the Assumed Par Value Capital Method. Every C-Corp can use either, and the one that produces the lower tax is the one you should file. Delaware does not pick the lower one for you.

Method 1: Authorized Shares (the default, almost always wrong)

The Authorized Shares Method calculates franchise tax based purely on the number of shares a corporation is authorized to issue, with no regard for whether those shares have actually been issued or what they are worth. The scale:

• Up to 5,000 authorized shares: $175 minimum tax.
• 5,001 to 10,000 authorized shares: $250.
• Each additional 10,000 shares (or fraction thereof): $85 more.
• Maximum tax under this method: $200,000.

The trap is that startup C-Corps typically incorporate with 10 million authorized shares — a standard "Stripe Atlas" or default Cooley template choice — so the founders can grant equity flexibly. That 10 million number is fine for cap table mechanics. It is also a $85,165 franchise tax bill under Method 1. The state mails this number on the annual invoice and most founders pay it without realizing they had a choice.

Method 2: Assumed Par Value Capital (the election that saves 80–95 percent)

The Assumed Par Value Capital Method ties the tax to a corporation’s actual issued capital and gross assets, not its theoretical authorized share count. The formula has three steps:

1. 1. Calculate your assumed par value: gross assets divided by total issued shares.
2. 2. Calculate your assumed par value capital: assumed par value × total authorized shares.
3. 3. Tax = $400 per $1,000,000 of assumed par value capital, with a $400 minimum and $200,000 maximum.

Worked example. A typical pre-seed C-Corp with 10,000,000 authorized shares, 8,000,000 issued shares (the founders’ initial grant), and $50,000 in gross assets. Under Method 1: $85,165. Under Method 2: assumed par value = $50,000 ÷ 8,000,000 = $0.00625; capital = $0.00625 × 10,000,000 = $62,500; tax = $400 minimum, because the result is under $1M. Same company. Same shares. $85,165 versus $400. That is the saving Delaware never points out.

You make the election by submitting the Assumed Par Value Capital calculation along with your annual report. Both filings happen at the same time — Delaware does not charge extra to use Method 2, but they require the supporting math.

Penalty math for missed deadlines

If June 1 passes without payment for a C-Corp, Delaware adds a $200 late penalty plus 1.5 percent monthly interest. The state also revokes Good Standing — which, for a C-Corp, can be more disruptive than for an LLC, because investors and lenders run Good Standing certificates as part of standard due diligence. A C-Corp that loses Good Standing in the middle of a fundraise has a problem that no amount of pitch deck polish solves.

A C-Corp can be reinstated by paying back taxes, penalties, and interest, plus filing all missed annual reports. The reinstatement process typically takes 2 to 4 weeks. If the company misses three consecutive years of franchise tax, Delaware can administratively dissolve the entity. Reviving a dissolved entity is possible but expensive and slow.

The foreign-founder complication

For founders living outside the United States, the Delaware franchise tax has one specific failure mode that does not exist for US-resident founders: the bill arrives by physical mail to the registered agent, who forwards it. If the registered agent has a stale address, an undeliverable email forwarder, or a slow paper-mail relay, the bill can simply not arrive in time. Foreign founders frequently learn they owe Delaware franchise tax for the first time when they get a "Lost Good Standing" notice — long after June 1.

The fix is on the calendar side, not the mailbox side. The deadline is the deadline regardless of whether the invoice reached you. Mark June 1 on a calendar you actually look at, and pay the tax directly through Delaware’s online portal — the bill is identical whether you wait for the mail or initiate the filing yourself.

The five-step playbook

1. Know your entity type. LLC owes $300 flat. C-Corp owes whichever method produces the lower number — and you have to file the math to use the lower one.
2. For C-Corps: calculate both methods every year. Run them on a spreadsheet or use Cherry to do it automatically. Pick the lower one.
3. File and pay through Delaware’s Division of Corporations portal by June 1. Do not wait for the registered agent to forward the paper bill.
4. Save the filing confirmation as a PDF. Investors will ask for proof of Good Standing in any diligence cycle.
5. If you missed it: file and pay immediately. Every month of delay adds 1.5 percent interest, and Good Standing status flips to "Not in Good Standing" on the public record the day after.

How Cherry handles Delaware franchise tax

For an autonomous fiscal agent, Delaware franchise tax is a calendar problem with one decision per year. Cherry tracks the June 1 deadline, runs both calculation methods automatically, elects the lower one, files the annual report, and pays the tax — for both LLCs and C-Corps. The Good Standing certificate is regenerated on the same day. For Cherry’s foreign-founder cohort, this is one less mailbox to watch and one less deadline to keep in their own head.