Franchise tax
A franchise tax is a state tax on a company’s right to exist, or to do business, in that state.
Updated · Sources
The state grants a company its franchise, the right to exist as a company. Because the tax is often not based on income, a company can owe it in a year with no revenue.
States measure their franchise taxes in different ways. Delaware bases its corporate franchise tax on authorized shares or assumed par value capital. Texas taxes each entity’s margin, which is its revenue minus certain deductions, and its franchise tax reaches LLCs as well. California’s corporate franchise tax is 8.84% of net income, with a minimum of $800 a year. A corporation that incorporates or qualifies (registers to do business) in California does not owe the minimum for its first taxable year.
Every for-profit Delaware corporation owes Delaware’s franchise tax each year, with or without income.
Sources
- 8 Del. C. §§ 501 to 518, Corporation franchise tax
- Cal. Rev. & Tax. Code § 23151, Franchise tax rate
- Cal. Rev. & Tax. Code § 23153, Minimum franchise tax
- Texas Comptroller of Public Accounts, Franchise tax
Reviewed and updated September 2026. General information, not advice for your situation.