Franchise Tax

By IncNow | Published October 19, 2013

An annual fee that a business pays to the State to maintain its Good Standing to do business. Failure to pay this franchise tax (and the associated filing fee), regardless of business activity or non-activity will result in the corporate charter being forfeited. This tax is not typically paid by accountants. Additionally, the franchise tax is not dependent on business activity. In the case of an LLC, the fee is fixed at $300 per year. In the case of a corporation, the amount of the tax is based on the stock authorized. A corporation with 1500 authorized shares only owes $125 per year ($75 franchise tax and $50 filing fee). For corporations with much authorized stock and little in assets, they are entitled to “recalculate” the tax on the asset method which can reduce the tax significantly. In the case of a non-profit corporation in Delaware, only the filing fee is due, not the associated franchise tax.

When deciding where to form your company, consider that Delaware has advantages over your home state that may benefit you. Go