What Is a Franchise Tax, by State?

A franchise tax is a flat annual fee a state charges for the privilege of keeping your LLC registered there. It is not a tax on your income, which is why it catches owners off guard: you can owe it in a year the company earned nothing. Delaware charges a flat $300, California a $800 minimum, Wyoming about $60, and several states charge nothing at all.

The name does not help. A franchise tax has nothing to do with franchises and, in most states, nothing to do with profit. It is closer to an annual membership fee for the right to exist as a company in that state, and it is owed on a schedule whether or not the business is active.

01Is a Franchise Tax Based on My Income?

In most states, no. The common form is a flat annual amount owed regardless of revenue, so a dormant LLC and a profitable one pay the same. A few states calculate it differently: Texas bases its franchise tax on revenue and exempts companies under a high threshold, so most small LLCs there owe zero, while California charges its $800 minimum no matter what the company earned.

02How Much Is the Franchise Tax by State?

It varies widely, and the state you formed in decides it:

• Delaware: $300 flat, due June 1 every year.
• California: $800 minimum, owed even in a year of zero income.
• Wyoming: about $60 minimum, based on in-state assets.
• Texas: $0 for most companies, revenue-based with a high no-tax-due threshold.
• Florida: no franchise tax at all, only an annual report fee.

This is one reason the cheapest state to form in is not always the cheapest to keep. A low filing fee paired with a high annual franchise tax can cost more over time than the reverse, which is worth weighing before you choose.

03Why Does the Bill Come as a Surprise?

Because founders anchor on the one-time cost of forming the company and rarely on the recurring cost of keeping it. The franchise tax then arrives months later, tied to a date you did not mark, in a year the business may not have made a cent. Formed in the wrong state for your situation, it is a bill that repeats annually for as long as the company exists.

04What Happens If You Don't Pay It?

The state moves your company out of good standing, adds penalties and interest, and, if it goes unpaid long enough, can administratively dissolve the LLC. That is a worse and more expensive position than the tax itself, because reinstating a dissolved company means back fees plus the reinstatement process. Paying the franchise tax on time is simply the cheapest path.

05How Does Prodezk Keep You Clear of It?

Choosing the right state to form in is the first place we prevent a surprise bill, weighing the annual cost, not just the filing fee. After that, we track each state's franchise tax and annual report dates for you and file them on time, so good standing is never something you have to remember. Begin here and an advisor maps your full annual cost before you commit to a state, not after.