What is Franchise Tax?

Not an income tax

Franchise tax has nothing to do with earnings. It's the state's annual price of keeping your charter alive — flat in some states (Delaware LLCs: $300, due June 1), formula-based in others (Delaware corporations, Texas margin tax), and famously heavy in California ($800 minimum, every year, profit or not).

What happens if you skip it

• Penalties and monthly interest stack automatically
• Good standing lapses — banks, lenders and buyers check
• Prolonged non-payment voids the entity; revival costs more than compliance ever would

Dead company? Still accruing

Franchise tax runs until formal dissolution or cancellation. Walking away doesn't stop the meter.