Delaware franchise tax in your first year of incorporation
When the first Delaware annual report is due, why the first-year tax is prorated, and how to avoid paying a full-year Authorized Shares bill.
Summary
Our answer: a corporation incorporated in Delaware during 2026 files its first annual franchise tax report and pays its first tax by March 1, 2027, and that tax covers only the part of 2026 the corporation existed. Section 503(d) of Title 8 says the tax is prorated for the portion of the year during which the corporation was in existence. Compute both methods, as in any year, since Section 503(a) charges the lesser of the two, and do not pay a full-year figure for a company that existed for a few months.
8 Del. C. 503(d): if the corporation did not exist for the whole year, the franchise tax is prorated for the portion of the year it was in existence; the first report is due March 1 of the following year (502(a)).
| First report and tax due | March 1 of the year after incorporation8 Del. C. 502(a); for a 2026 incorporation, March 1, 2027. |
|---|---|
| First-year tax | Prorated for the part of the year the corporation existed8 Del. C. 503(d). |
| Minimum tax | $175 (Authorized Shares) or $400 (Assumed Par Value)Section 503(c) sets these for a full taxable year. |
| Annual report fee | $50Non-exempt domestic corporations (corp.delaware.gov/paytaxes). |
| Late | $200 penalty plus 1.5% interest per monthDelaware Division of Corporations. |
| Not yet operating | Half rate for that portion of the year8 Del. C. 503(f), on the report; the Secretary of State may ask for an affidavit. |
Our verdict
File the first annual report by March 1 of the year after you incorporated, compute the tax under both methods (Section 503(a) charges the lesser), and expect a prorated amount. A first-year bill that looks like a full year is not the number the statute asks for. Which method is lower depends on your shares, issued shares and gross assets; with large gross assets, the Authorized Shares Method can be the lower one.
Who this page is for, and who it is not for
For: founders of a Delaware stock corporation with par-value shares incorporated during the year, typically after a startup formation. Not for: Delaware LLCs and LPs (a flat annual tax, no report), corporations that changed authorized shares or par value during the year, no-par stock, and Large Corporate Filers.
Example: a startup formed on October 1, 2026
A corporation is incorporated on October 1, 2026 with 10,000,000 authorized shares at $0.00001 par, issues 8,000,000 shares to its founders and has $20,000 of gross assets on December 31, 2026. It existed for about a quarter of 2026.
| Method | Full-year amount | About one quarter of the year |
|---|---|---|
| Authorized Shares Method (10,000,000 shares) | $85,165 | about $21,300 |
| Assumed Par Value Capital Method ($20,000 / 8,000,000 = $0.0025 per share; $25,000 of assumed par value capital) | $10 computed, $400 full-year minimum | the portal's prorated figure, at most the full-year $400 |
| Annual report fee | $50 | $50 (we found no rule prorating the fee) |
Rates: 8 Del. C. 503(a). Proration: 503(d). Minimums for a full taxable year: 503(c). The Delaware portal computes the official amount.
Why first-year notices look alarming
Delaware's default calculation uses the Authorized Shares Method, which charges $85 for each additional 10,000 shares above 10,000. A startup with 10,000,000 authorized shares sees $85,165 for a full year. Section 503(a) charges the lesser of the two methods. For a startup with few gross assets, the Assumed Par Value Capital Method is often far lower; for one with large gross assets relative to its issued shares, it can be higher, so compute both. Proration then applies to the result.
If the corporation has not started operating
Section 503(f) lets a corporation that shows on its report that it has not engaged in the business it was formed for pay half the rate for that portion of the year. The Secretary of State may ask for a supplemental affidavit. Our calculator does not apply this reduction; claim it on the official report if it fits your facts.
Next steps
Common questions
Do I pay Delaware franchise tax for the year I incorporated?
Yes, for the part of that year the corporation existed. Section 503(d) prorates the tax, and the first annual report is due by March 1 of the following year.
My company was formed in November. Do I owe a full year?
No. The tax is prorated for the portion of the year during which the corporation was in existence (8 Del. C. 503(d)). A corporation formed in November owes roughly one-sixth or less of a full-year amount, before the $50 annual report fee.
Does the $400 minimum apply in the first year?
Section 503(c) writes the $175 and $400 minimums for a full taxable year. We have not found Division of Corporations guidance on how the portal applies them to a partial first year, so pay the amount the portal computes for your corporation and compare it with your full-year Assumed Par Value figure: the first-year amount should not be higher.
Can I use Delaware Franchise Desk for my first report?
Yes for choosing the method, with one limit: our calculator works on a full year and does not prorate. If you also changed your authorized shares or par value during the year, that is a hard stop, because Section 503(e) prorates each period separately.
Compare the two methods
Our calculator compares Authorized Shares and Assumed Par Value Capital on a full-year basis. In a first partial year, use it to choose the method, then check the prorated amount the Delaware portal shows.
Open checkerRelated guides
Delaware franchise tax and stock amendment during the year
A hard-stop guide for Delaware corporations with stock amendments, recapitalizations or cap table changes before annual report filing.
Dissolving a Delaware corporation: franchise tax first
What Delaware requires before a Certificate of Dissolution, why taxes keep running until you file, and the timing that avoids an extra year.
When is Delaware Franchise Tax due?
The March 1 annual report and franchise tax deadline for active domestic Delaware corporations.
Official sources for this guide
Last reviewed: .