What is Franchise Tax? Definition, requirements, and how it applies to your business formation. Learn everything about franchise tax for LLCs and corporations.
# Franchise Tax
A franchise tax is a state-level tax imposed on businesses for the privilege of being organized or doing business in that state. Despite its name, it has nothing to do with franchising — it is essentially a fee for maintaining your entity's legal existence. Calculation methods vary: some states base it on authorized shares, others on assets or revenue.
Delaware's franchise tax is notoriously complex, calculated using either the Authorized Shares Method or the Assumed Par Value Capital Method (whichever produces a lower amount). Minimum is $400/year for corporations. Texas imposes a franchise tax (called 'margin tax') on entities with revenue above $2.47 million.
Lovie's compliance monitoring alerts you before franchise tax deadlines and provides calculation guidance for Delaware's dual-method system.