What Franchise Tax Actually Is
Despite the name, franchise tax has nothing to do with franchising a business — it's a state-level fee charged for the privilege of being registered as an LLC or corporation in that state, and in most states it's owed regardless of whether the company made any money.
What Happens If It Goes Unpaid
Unpaid franchise tax accrues penalties and interest over time and can eventually push an LLC out of good standing or into administrative dissolution — the exact consequences and amounts vary significantly by state, so check your formation state's specific rules rather than assuming a flat national figure.
Key Insights
- 1Franchise tax is charged for existing as a registered entity, not for earning income — a zero-revenue LLC can still owe it.
- 2
