Key figures
Delaware advisory
2026, with sources
Where founders go wrong
Delaware is where most venture-backed companies incorporate because of its corporate law, and its tax costs for a company that operates elsewhere are small: the franchise tax, the annual report fee and a registered agent. The common mistakes are about those three things, not about Delaware income or payroll tax.
- Paying the authorized-shares invoice without recalculating on assumed par value capital.
- Assuming incorporation in Delaware means taxes are only owed in Delaware.
- Missing March 1, which adds a $200 penalty and 1.5% monthly interest on tax and penalty.
- Letting the registered agent lapse, which puts the company out of good standing.
- Ignoring unclaimed property because no one works in Delaware.
The Delaware R&D credit
Delaware’s credit under 30 Del. C. § 2070 covers research performed in Delaware. A company elects either 10% of Delaware qualified research expenses above a Delaware base amount, or 50% of Delaware’s apportioned share of the federal Alternative Simplified Credit; a small business with average gross receipts of $20 million or less doubles those to 20% and 100%. The credit is refundable.
It is approval-based. The company files Form BUS-RDC with the Division of Revenue by September 15 after the tax year and attaches federal Form 6765. For a startup with no Delaware staff, the credit doesn’t apply.
A franchise tax example
Take a startup with 10,000,000 authorized shares at $0.00001 par, 6,000,000 shares issued and $2,000,000 of total gross assets at year end. On the authorized shares method the tax is $250 for the first 10,000 shares plus $85 for each of the remaining 999 blocks of 10,000: $85,165. On the assumed par value capital method, assumed par is $2,000,000 ÷ 6,000,000 = $0.333333; times 10,000,000 authorized shares that is $3,333,330 of assumed par value capital, rounded up to $4 million, times $400 per million: $1,600.
Same company, same year, two answers that differ by more than $80,000. The state’s default notice uses the first; the second requires filing the annual report with the issued share count and gross assets. Gross assets come from the balance sheet, which is one more reason the year-end close needs to be done before March 1.
Unclaimed property follows the charter
Under the federal priority rules, unclaimed property whose owner has no known address goes to the holder’s state of incorporation. For a Delaware corporation that means Delaware, wherever the company operates. Delaware enforces this actively, through verified report requests and audits, and the Secretary of State runs a Voluntary Disclosure Agreement program for holders that have never filed.
The federal baseline
This page covers what Delaware adds. The federal rules underneath it apply here too.
Common questions
Our Delaware franchise tax bill says $85,000. Do we really owe that?
Probably not. The invoice the state sends by default is computed on the authorized shares method, which charges by the number of shares in the charter: a company with 10 million authorized shares sees a five-figure number. The assumed par value capital method uses gross assets and issued shares instead, and for a typical early-stage company it comes out at or near the $400 minimum. You must file the annual report with issued shares and total gross assets to get it, and the lower tax applies only if the report says so.
Is the Delaware R&D credit useful to a company with no Delaware tax?
It can be refunded. The Delaware R&D credit is refundable: an approved credit the company can’t use against tax is paid to it. The credit is only for research done in Delaware, and the BUS-RDC application must reach the Division of Revenue by September 15 after the year ends; the deadline is set in statute.
Where do we pay taxes, Delaware or the state we operate in?
Both, separately. Delaware’s own rules decide what you owe Delaware; the state where the work happens decides payroll, income tax and sales tax there. A Delaware C-corp with its whole team in another state usually owes Delaware only the franchise tax, the $50 annual report fee and a registered agent, and owes the other state everything else.
Advisory next door
- MDMaryland advisoryMaryland’s R&D credit is 10% over a base and refundable for small businesses. Biotech investors get a refundable credit, and FAMLI adds a payroll cost from January 2027.
- NJNew Jersey advisoryNew Jersey lets startups sell their losses and R&D credits for cash, gives angel investors a 35% refundable credit, and follows federal QSBS from 2026.
- PAPennsylvania advisoryPennsylvania’s R&D credit can be sold, which makes it worth applying for before profit. Pennsylvania doesn’t follow federal QSBS, and its corporate rate keeps falling to 4.99% in 2031.
Founder guides on this
- R&D taxThe R&D tax credit and Section 174A for startupsEngineering salaries can earn a federal R&D credit against payroll tax, and Section 174A lets you deduct US research again. What qualifies, what to track.
- ComplianceFirst-year compliance calendar for a Delaware C-corpDelaware franchise tax, 1099s, the federal return, payroll filings, state annual reports and sales tax: the deadlines a young C-corp misses most, by month.
- SAFEsHow to account for SAFEs on your balance sheetA SAFE is cash today and shares later. Why it usually sits with liabilities, how the cap and discount set conversion, and what to book at the priced round.
More of the Delaware guide
- AccountingAccounting and state tax in DelawareCorporate tax, conformity to federal rules, apportionment and what it does to your books
- ReceivablesReceivables and sales tax in DelawareSales tax registration, economic nexus, whether SaaS is taxable, and collecting from customers
- PayablesPayables and contractors in DelawarePaying vendors and contractors: 1099 filing, use tax, contractor tests and withholding
- PayrollPayroll taxes and employer rules in DelawareWithholding, unemployment insurance, paid leave, minimum wage and the rules on paydays
- ComplianceCompliance and filings in DelawareRegistering to do business, annual reports, franchise tax and the filing calendar
Sources
Checked against each agency’s own page on . Rates and thresholds change, usually on January 1.
General information for US companies, not tax, legal or accounting advice for yours. Rules and thresholds change; confirm the specifics with a CPA or the agency before you act on them.