Delaware C-Corp Compliance Guide

Overview

Delaware is the most popular state for incorporation in the United States, with over 60% of Fortune 500 companies incorporated there. Delaware's business-friendly laws, specialized Court of Chancery, and well-developed corporate law make it an attractive choice for businesses of all sizes.

This guide covers the compliance requirements for Delaware C-Corporations.

Key Compliance Requirements

1. Annual Report and Franchise Tax

Delaware corporations must file an Annual Report and pay franchise tax each year.

Due Date: March 1st (strict deadline - no automatic extensions)

Annual Report Information Required:

Names and addresses of directors

Names and addresses of officers

Principal place of business

Franchise Tax Calculation:

Delaware offers two methods for calculating franchise tax. You pay the LOWER amount:

Method 1: Authorized Shares Method

5,000 shares or less: $175 minimum

5,001 - 10,000 shares: $250

Each additional 10,000 shares: add $85

Maximum: $200,000

Method 2: Assumed Par Value Capital Method

This method considers:

Total authorized shares

Total issued shares

Total gross assets

Formula: (Assumed Par Value x Authorized Shares) ÷ 1,000,000 x $400

For most startups with high authorized shares but low assets, this method results in the minimum tax of $400.

Filing Fees:

Annual Report filing fee: $50

This is in addition to the franchise tax

Example Calculations:

*Startup Corporation A:*

10,000,000 authorized shares (common for VC-backed startups)

1,000,000 issued shares

$50,000 gross assets

Using Authorized Shares Method: Over $80,000

Using Assumed Par Value Method: $400 (minimum)

Pay: $400 + $50 filing fee = $450

*Established Corporation B:*

1,000 authorized shares

1,000 issued shares

$5,000,000 gross assets

Using Authorized Shares Method: $175

Using Assumed Par Value Method: $400

Pay: $175 + $50 filing fee = $225

Payment Methods:

Online at corp.delaware.gov (recommended)

Mail check to Delaware Division of Corporations

2. Registered Agent

Delaware corporations must maintain a registered agent in Delaware at all times.

Requirements:

Must be a Delaware resident or a corporation authorized to act as a registered agent

Must have a physical street address in Delaware

Must be available during normal business hours

Registered Agent Fees:

Typically $50-$300 per year depending on provider

This is paid to your registered agent, not to the state

Changing Your Registered Agent:

File a Certificate of Change of Agent

Filing fee: $50

3. Other State Filings

Certificate of Amendment:

Required for any changes to Certificate of Incorporation

Filing fee: $200 minimum

Change of Principal Place of Business:

File amended Annual Report

No additional fee if done with regular Annual Report

Penalties for Non-Compliance

Delaware takes franchise tax compliance seriously.

Late Payment Penalties:

$200 penalty for late filing

1.5% interest per month on unpaid tax

Corporation voids if not filed for 3 consecutive years

Voided Corporation:

If your corporation voids, you cannot:

Conduct business

File lawsuits

Transfer property

Perform any corporate acts

Reinstatement:

File all past-due Annual Reports

Pay all past-due taxes, penalties, and interest

File Certificate of Renewal/Revival

Revival fee: $209 or more

Annual Compliance Calendar

| Date | Obligation |

|------|------------|

| January 1 | Franchise tax calculation period begins |

| March 1 | Annual Report and Franchise Tax DUE (strict deadline) |

| March 2 | Late penalties begin accruing |

| Throughout Year | Maintain registered agent |

Delaware-Specific Advantages

Court of Chancery

Delaware has a specialized business court (Court of Chancery) that handles corporate disputes without juries. This leads to:

Faster resolution of disputes

More predictable outcomes

Extensive legal precedent

Business-Friendly Laws

Directors have broad discretion in business decisions

Strong protection for board decisions made in good faith

Flexible corporate structure options

Privacy

Delaware does not require disclosure of officer/director names in the Certificate of Incorporation

Shareholder names are not part of public record

No Corporate Income Tax for Out-of-State Business

Delaware corporations that operate entirely outside Delaware pay no Delaware corporate income tax

You may still owe tax in states where you actually do business

Common Mistakes to Avoid

1. Using the Wrong Tax Calculation Method

- Always calculate using BOTH methods and pay the lower amount

- Many companies overpay by using only the Authorized Shares method

2. Missing the March 1 Deadline

- There is no grace period

- Penalties begin immediately on March 2

3. Letting Registered Agent Lapse

- If your registered agent resigns, appoint a new one immediately

- Legal documents may not be properly served without a registered agent

4. Forgetting About Delaware When Operating Elsewhere

- Even if you do all your business in California, you still have Delaware obligations

- Delaware compliance is in addition to any state where you actually operate

Conclusion

Delaware corporation compliance is straightforward but requires attention to the March 1 deadline. By understanding the franchise tax calculation methods and maintaining your registered agent, you can keep your Delaware corporation in good standing.

StartCorp calculates your Delaware franchise tax using both methods automatically and reminds you well in advance of the March 1 deadline. Sign up for free to simplify your Delaware compliance.