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Business & FinanceDelaware, USA

Delaware Corporate Franchise Tax

Summary

Delaware does not charge a state sales tax, but it funds a massive portion of its state government by charging an annual 'Franchise Tax' to the hundreds of thousands of corporations registered there.

Rights & Rules

  • 01.
    If you incorporate a business in Delaware, you MUST pay this tax every year, even if your business is physically located in another state (like California or New York) and does zero actual business in Delaware.
  • 02.
    The tax is NOT based on your company's income or profits.
  • 03.
    The tax is calculated based on either the number of authorized shares your company has, or an 'assumed par value' capital method.
  • 04.
    The absolute minimum tax for a small corporation is $175 per year, while massive public companies can pay up to $250,000 per year.

Penalties

  • 01.
    If you fail to pay the Franchise Tax by March 1st each year, the state applies a $200 penalty plus 1.5% interest per month. If you ignore it for long enough, Delaware will administratively dissolve your company.

Verified Citations

Delaware Code Title 8, Section 503

Source
"Every corporation... shall pay an annual franchise tax... The tax shall be $175 for a corporation having 5,000 shares or less..."