Keeping the company in good standing · A term for founders abroad
What is franchise tax?
A state's yearly tax on a company for existing or doing business there, nothing to do with franchises; Delaware corporations and Texas companies owe one.
Checked against the IRS's instructions and the states' own rules. Reviewed by Saais Patel, compliance reviewer.
Term 56 of 105 in the glossary, filed under F.Delaware Division of Corporations: how to calculate franchise tax
Franchise tax, for a founder abroad.
Despite the name, a franchise tax has nothing to do with franchises. It's a state's yearly tax on a company for being formed or doing business there, worked out on shares, assets, revenue or a flat amount depending on the state.
- Delaware corporations pay it by 1 March. On authorised shares alone, ten million shares cost $85,165; on the assumed par value capital method, a new startup with modest assets usually pays the $400 minimum.
- Delaware LLCs pay a flat $400 that Delaware also calls a franchise tax.
- Texas companies file a franchise tax report and owe tax only above a revenue threshold.
- California charges most LLCs and corporations an $800 minimum a year.
Sources: Delaware Division of Corporations: how to calculate franchise tax.
Read next · guide · 3 minHow a foreign-owned Delaware C-Corp is taxed: Form 1120, franchise tax and dividendsWhat founders ask next.
- Why is my Delaware franchise tax bill so high?
- Delaware's notice uses the authorised shares method, which can run to tens of thousands of dollars. Filing on the assumed par value capital method usually brings a new startup down to the $400 minimum. The cap table guide shows the numbers.
- Does a Wyoming company pay franchise tax?
- No. Wyoming charges a $60 annual report licence tax and has no franchise or income tax on companies.
03 · See also
- Keeping the company in good standingDelaware annual LLC taxThe flat $400 tax every Delaware LLC pays by 1 June each year, raised from $300 in 2026; Delaware LLCs file no annual report.Read the term
- Keeping the company in good standingAnnual reportThe yearly filing a state requires to keep a company in good standing: $60 in Wyoming; a Delaware LLC files none and pays a yearly tax instead.Read the term
- Keeping the company in good standingWyoming annual report licence taxWyoming's yearly charge on an LLC: $60, or $0.0002 per dollar of Wyoming assets if more, due on the first day of the month it was formed in.Read the term
- Keeping the company in good standingGood standingThe status of a company that has filed and paid everything its state requires; lost by missing a report or tax, and proved by a certificate.Read the term
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