What is Franchise Tax?

  • Tax

Franchise tax is a state-level tax charged for the privilege of doing business in a state. It applies to many LLCs, corporations, and partnerships. It does not mean you operate a franchise brand.

You may owe franchise tax even if your business makes no profit.

How Is Franchise Tax Different From Income Tax?

Income tax is based on profit.
Franchise tax is based on your legal right to operate in a state.

Some states charge both. That means your business could owe franchise tax even in a year when income tax is zero.

R&D Offer Quiz

Step 1 of 3

Answer to find out if you're eligible for R&D tax credits.

Do the activities performed relate to a new or improved business component’s function, performance, reliability, quality, or composition?(Required)
For Example: A mid-sized packaging company develops a slightly modified cardboard box design to improve its stacking strength (reliability) for warehouse storage, involving minor adjustments to the corrugation pattern to reduce collapse under standard weight loads.
Is your company trying to discover information to eliminate uncertainty concerning the capability or method for developing or improving a business component?(Required)
For Example: A furniture manufacturer investigates whether a cheaper wood adhesive can hold joints as effectively as the current one during assembly, testing bond strength to resolve doubts about its capability in standard production lines.
Do the activities performed constitute a process of experimentation?(Required)
For Example: An auto parts supplier runs a series of bench tests on different lubricant formulations to find one that reduces friction in engine bearings more effectively, systematically comparing wear rates over simulated operating cycles.