State franchise tax: Delaware, California, Texas & New York
Franchise tax is the state's annual rent for letting your entity exist. You owe it even at $0 revenue, even at a loss. The four states that catch most SMBs are Delaware (popular formation state), California (largest market), Texas (margin tax), and New York. Miss a filing and the state can administratively dissolve the entity — which collapses the corporate veil.
The four states most SMBs care about
| State | Who owes | Amount | Due date |
|---|---|---|---|
| Delaware | Corps + LLCs | Corps: $175–$200,000 (Auth Shares or Assumed Par) + $50 report. LLCs: $300 flat. | Corps: March 1. LLCs: June 1. |
| California | Corps + LLCs (incl. foreign) | $800 minimum + LLC fee tier on CA gross receipts > $250k. | 15th day of 4th month after fiscal year start. |
| Texas | Most entities with TX gross receipts | 0.375% wholesale/retail OR 0.75% other, on lesser of GR×70%, GR−COGS, GR−comp. Threshold: $1.23M no-tax-due. | May 15. |
| New York | Corps + LLCs | Corps: tiered by receipts ($25–$200,000). LLCs: filing fee tiered by receipts ($25–$4,500). | 2.5 months after fiscal year-end. |
Other states with annual franchise / privilege / business entity-level fees: Arkansas, Connecticut, Illinois, Massachusetts, Pennsylvania, Tennessee, Oklahoma, Mississippi, Georgia. None as frequently misfiled as the four above.
Why franchise tax pierces the veil
State franchise tax is the rent for the legal personhood the state confers on your entity. Stop paying it and the state administratively dissolves (corporation) or cancels (LLC) the entity. Once dissolved:
- The entity loses standing to sue or be sued in state court.
- Officers and members may be held personally liable for post-dissolution acts.
- Lenders and landlords running due-diligence pull a Secretary-of-State certificate and see "forfeited" / "cancelled" / "void" status — deals stop.
- Reinstatement is possible but requires paying back-taxes + penalties + interest + a reinstatement fee, which can be several years' worth.
Delaware's two computation methods
Delaware corporations get billed using whichever produces a lower tax — but the state defaults to Authorized Shares, which is almost always higher for startup-style cap tables (10M authorized shares). Most companies switch to Assumed Par Value Capital by recomputing on the Annual Report:
- Authorized Shares method — $175 minimum (≤5,000 shares), scaling up to $200,000 for the very largest cap tables. Cheap for small caps, brutal for startups with 10M authorized at $0.0001 par.
- Assumed Par Value Capital method — based on total gross assets divided by issued shares, then multiplied by authorized shares. For most pre-revenue startups this lands at the $400 minimum. The math is on the Delaware Division of Corporations site.
HelloBooks computes both and reports the lower number on the Annual Report so you don't accidentally overpay.
How HelloBooks does this
HelloBooks tracks every state where you're registered, fires reminders 30 days before each due date, and computes the right number from the books.
- 1
Identify every state where you're registered
List your home state of formation, plus every state where you've filed for Authority to Do Business (foreign qualification). Each one likely owes franchise tax or an annual report fee. HelloBooks stores the registration record per state and tracks the due date.
- 2
Tag each state's filing schedule
Delaware: March 1 for corporations, June 1 for LLCs. California: April 15 for first $800, June 15 estimated LLC fee. Texas: May 15. New York: 2.5 months after fiscal year-end. HelloBooks pre-loads the calendar so reminders fire 30 days before each due date.
- 3
Compute the tax owed each year
HelloBooks pulls revenue and apportionment data from the books to compute the franchise tax for each state — California $800 + LLC fee tier, Delaware Authorized Shares vs Assumed Par Value (whichever is lower), Texas margin tax with the right COGS / compensation deduction. Review the working paper before paying.
- 4
File and pay through the state portal
Each state has its own portal — Delaware Division of Corporations, California Franchise Tax Board, Texas Comptroller, NY Department of Taxation. HelloBooks generates the data the portal needs and records the confirmation number against the books.
- 5
Reconcile the journal entry
Post the franchise tax expense to the right state's tax account in the books. HelloBooks ties the journal entry to the filing record so the audit trail is clean if you're ever asked to prove a payment.
Frequently asked questions
What is state franchise tax — is it the same as income tax?
No. Franchise tax is a separate state tax for the privilege of doing business in the state — you owe it whether or not you made a profit. State income tax (where it exists) taxes net income. A state can charge both, and many do. Franchise tax goes by different names — California calls it the franchise tax, Delaware calls it the annual report fee plus franchise tax, Texas calls it the margin tax, New York calls it the franchise tax on business corporations.
Which states charge a franchise tax for LLCs?
The big ones: California ($800 minimum LLC tax + gross receipts fee), Delaware ($300 LLC tax flat), Texas (margin tax — 0.375% or 0.75% on gross receipts above $1.23M), New York (LLC publication requirement + a small annual filing fee). Other states with annual LLC fees include Arkansas, Connecticut, Illinois, Massachusetts, Pennsylvania, and Tennessee. The threshold above which the tax actually kicks in varies — Texas has the highest 'no-tax-due' threshold.
What does Delaware specifically require?
Delaware C-corporations file an Annual Report and pay franchise tax by March 1 each year. Minimum franchise tax is $175 (using the Authorized Shares method) or $400 (Assumed Par Value Capital method) — Delaware computes both and bills the lower. The Annual Report fee is $50. Delaware LLCs and LPs don't file an Annual Report but owe a flat $300 LLC / LP tax by June 1. Late filing penalty is $200 + 1.5% monthly interest on franchise tax.
How does the California $800 LLC tax work?
California charges every LLC $800 per year just for being registered in or doing business in California — that's the 'minimum franchise tax' (Annual LLC Tax) regardless of revenue or profit. On top of that, LLCs with California gross receipts above $250,000 owe an LLC fee on a sliding scale up to $11,790 (for LLCs with > $5M in California gross receipts). The first-year $800 was waived 2021–2023 but is back in 2024 onwards. Delaware LLCs registered as foreign LLCs in California also owe this.
What is the Texas margin tax?
Texas does not have a corporate or personal income tax — instead it charges a margin tax (officially the Texas Franchise Tax) on entities with Texas gross receipts. No-tax-due threshold is $1.23M (2024) — below that you file a No Tax Due Report but owe nothing. Above the threshold, the rate is 0.375% for wholesalers/retailers and 0.75% for everyone else, applied to the lesser of (gross receipts × 70%), (gross receipts − COGS), or (gross receipts − compensation). Due May 15 each year.
What happens if I don't file?
States can administratively dissolve or revoke the entity. Once dissolved, the entity no longer has legal personhood — the corporate veil collapses, officers can be sued personally, and you can't enforce contracts or sue in state court. Reinstatement is possible but requires paying all back taxes, penalties, interest, and a reinstatement fee. The harder consequence: lenders and landlords pull credit reports / Secretary-of-State lookups; a 'forfeited' status freezes deals.
Do single-member LLCs owe franchise tax?
Yes — single-member LLCs are taxed as separate entities for state franchise-tax purposes even though the IRS treats them as disregarded entities for federal income tax. California's $800 applies to single-member LLCs. Delaware's $300 applies. Texas's margin tax applies (though most single-member LLCs are under the $1.23M threshold). State franchise tax is one of the few cases where 'disregarded for federal' does not mean 'disregarded for state'.
What about S-corp election — does that change franchise tax?
S-corp election is a federal tax election under Subchapter S — most states honor it for state income tax purposes (S-corps pass through to shareholders) but franchise tax is a separate regime. California charges S-corps a 1.5% franchise tax on net income with an $800 minimum. New York charges S-corps a fixed franchise tax based on receipts. The S election does not exempt you from these obligations.
More on US compliance
US Sales Tax: Nexus, Marketplace Facilitator & Multi-State Filing
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Read payroll & w-2Quarterly Estimated Tax: Form 1040-ES, Safe Harbor & Due Dates
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Read quarterly estimated taxAuthoritative sources
US tax rules change every filing season. Always verify the current position with the official sources below before filing.
- IRS — irs.govInternal Revenue Service. Forms, publications, due dates, and current-year thresholds for federal income tax, payroll tax, and 1099 reporting.
- IRS — Forms & InstructionsCanonical PDF forms (W-4, W-9, 1099-NEC, 1040-ES, 941, 940, W-2, W-3) with current-year instructions.
- SSA — Business Services OnlineSocial Security Administration portal for W-2 / W-3 e-filing, EIN verification, and AccuWage validation.
- Streamlined Sales Tax — streamlinedsalestax.orgMulti-state Streamlined Sales and Use Tax Agreement (SSUTA) — registration in 24 SST member states with one application.
- Tax Foundation — Sales Tax & NexusIndependent state-by-state research on sales tax rates, economic nexus thresholds, and franchise / margin tax structures.
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