Franchise Tax LLC Fee: What You Actually Owe Each State

The franchise tax LLC fee is a state-level charge for the right to operate as an LLC in that state, and it has nothing to do with your income. Delaware charges a flat $300 per year, California charges a minimum of $800 plus a gross receipts fee, and states like Wyoming and Ohio charge nothing at all. Get the state wrong when you form, and you could end up paying this fee twice.

Think of the franchise tax LLC fee as a state’s way of making you pay for the right to have an LLC on its books. It is not related to what you put in your pocket; whether you are sitting on $5 million or $0, the state wants its cut.

We see the confusion this causes. The name “franchise” makes one think it applies to a Subway or a Marriott, but that is not the case. It is simply a charge for the privilege of being registered as a business entity in that state, and in most places, it is due come what may, separate from any federal or state income tax. Some states will call it an annual tax or a report fee, but the obligation remains.

You can form your LLC in the wrong state and end up paying fees in two jurisdictions. We get asked about this nearly every week by a founder who has received an unwelcome notice from a tax agency they were unaware they owed money to. More often than not, it is someone who was told by a friend to set up in Delaware and only discovers three years down the line, while running the operation out of a San Francisco apartment, that California’s $800 minimum is also theirs to cover.

What Is a Franchise Tax LLC Fee?

In short, it is a state charge for being organized there. Founders tend to mix up two things: they assume it is an income tax (you can be in the red and still owe it) or a one-off formation cost (it renews annually so long as the LLC exists, bank account or not).

How Much Is the Delaware LLC Franchise Tax?

Non-resident founders most commonly form with us in Delaware, which is why we are fielding the most questions on this front. Under 6 Del. C. § 18-1107(b), the 2026 rate is a flat $300, payable June 1. There is no need for the kind of math on authorized shares that corporations face, nor is there an annual report requirement for an LLC.

But do not make the mistake of thinking $300 is a fixed number forever. The Division of Corporations has announced a fee adjustment for later in 2026, so it is best to check their portal before handing over the money. And remember, the first payment is not due until the calendar year following your formation; if you form in November 2026, you won’t be on the hook until June 1, 2027.

Then there is the issue of deadlines. Miss one, and Delaware will tack on a $200 penalty and 1.5 percent interest per month on the remaining unpaid balance. We also run into founders who have mentally dissolved their company but never filed a Certificate of Cancellation. The state does not read minds, only filings, so that $300 will keep building up until you put it in writing.

How Does California’s Franchise Tax Compare?

California is at the other end of the spectrum, where the costs become real. Any LLC doing business in the state owes the Franchise Tax Board a minimum of $800 via Form 3522, regardless of losses. The first-year exemption under Assembly Bill 85 is a thing of the past as of the end of 2023; an LLC formed in 2024 or later has to pay the full $800 from the start.

Once you cross $250,000 in California-sourced income, they add a gross receipts fee to the $800 minimum.

That is the rub for a founder who has a Wyoming or Delaware LLC and then starts putting on California staff or contractors. They get hit with the extra fees. Under California’s definition, an LLC that is “doing business” in the state must pay the franchise tax as well as any charges from its formation state. It is not uncommon for us to come across founders who are shelling out $300 to Delaware and over $800 to California for the same entity. The reason is usually a failure to register the foreign qualification properly or to make the overlap clear from the start.

Which States Have No Franchise Tax for LLCs?

When founders are looking at formation costs online, they don’t always appreciate how much of a difference it can make to choose a state that doesn’t levy this fee. You won’t find it in Wyoming, Ohio, Missouri, South Carolina, or Arizona. Nevada is on the list too, but expect to pay about $350 in annual license and business license fees. Then there is Wyoming, which has made an industry of its formation process: aside from a $60 annual report (more of a nuisance than a cost), you face no state income or franchise tax.

But forming in a low-fee jurisdiction does not absolve you of other obligations. For a non-resident founder with no US footprint, no employees, customers, or physical presence in any given state, a Wyoming or Delaware LLC is the neatest arrangement. Introduce a warehouse, an employee, or a sizeable customer base in another state, and you will be subject to their franchise tax or foreign qualification rules, no matter where you were formed.

Common Mistakes Founders Make With Franchise Tax

We tend to raise these points before they are even asked because we see them time and again.

There is the assumption that no income means no filing. That is not the case; the tax is on the company’s existence. We have had founders with two years of zero revenue still have to come up with California’s $800 twice over, along with penalties for not filing.

Some conflate the franchise tax with the annual report fee. They may be separate or bundled. In Texas, a small LLC below the no-tax-due threshold (about $2.47 million in annualized revenue) owes no traditional franchise tax, yet it must file the Public Information Report and the franchise tax report to remain in good standing, even if the amount due is $0.

Then there is the matter of dissolution. An LLC that has ceased operations but has not been formally canceled will continue to accrue interest and penalties for years until the state administratively dissolves it. It is the most costly error of all.

Or you are only paying one state when you should be paying more. A single-member LLC from Wyoming is not exempt from California’s fee if it has a full-time contractor there. And do not let a few days slip by. Delaware will slap a $200 late penalty on a $300 bill, a 67 percent markup for tardiness. In California, the penalties compound monthly. These are not expenses to incur over a missed reminder email.

Step-by-Step: How to Pay Your LLC’s Franchise Tax

1. Find out the due date in your formation state. In Delaware, it is June 1; for calendar-year LLCs in California, the 15th of April. Each state has its own schedule.
2. Determine if you have nexus elsewhere. If you have an office, staff, or a real customer base in another state, you likely owe them as well.
3. Get the right form. You can handle Delaware through the Division of Corporations’ portal without one. California requires Form 3522 for the tax and Form 568 for the return.
4. Use the online option. Most states now offer same-day payment confirmation, which is useful if you are making a last-minute payment from outside the country.
5. Hold on to your receipt. Should a state allege non-payment later, the confirmation number is your only evidence, and non-residents may not have a local contact to resolve it.
6. Put a reminder in the calendar for next year. The due dates are fixed, but people tend to forget them.

Not sure which states require your franchise tax or how to put a lapsed filing back in order? Our team can be of assistance. We will sit down with you and map out your obligations well before the next deadline.

FAQs about Franchise Tax LLC Fee