Franchise Tax Returns


A franchise tax is a state tax levied on certain businesses for the right to exist as a legal entity and to do business within a particular jurisdiction. Contrary to what the name implies, a franchise tax is not a tax imposed on a franchise. Rather, it’s charged to corporations, partnerships, and other entities like limited liability corporation (LLCs) that do business within the boundaries that state. Some entities are exempt from franchise taxes, namely fraternal organisation nonprofits, and certain LLCs. Companies that do business in multiple states are generally charged a franchise tax in the state in which they are formally registered.

A franchise tax is not a levy imposed on a franchise.
Franchise taxes do not replace federal and state income tax, so it’s not an income tax. These are levies that are paid in addition to income taxes. They are usually paid annually at the same time other taxes are due. The amount of franchise tax can differ greatly depending on the tax rules within each state. Some states calculate the amount of franchise tax owed based on an entity’s assets or net worth while other states look at the value of a company’s capital stock Still, other states may charge a flat fee to all businesses operating in their jurisdiction or calculate the tax rate on the company‚Äôs gross receipt or paid in capital