Tax
Franchise tax
Franchise tax is a US state tax charged for the privilege of existing or doing business in that state, rather than on profit. Delaware charges LLCs a flat $300 annually; other states calculate it on capital, revenue or authorised shares. It is owed regardless of income.
In plain terms: A fee for existing in a state, whether or not you made money.
Why it matters
The line that surprises dormant companies. Delaware's $300 is due every year regardless of activity, and California's $800 minimum applies to LLCs doing business there even if formed elsewhere.
Common misunderstanding
Assuming a company with no revenue owes nothing. Franchise tax is an obligation of existence.
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