State franchise taxes and other taxes on the business itself

A franchise tax is a state tax for the privilege of existing as a company in that state, or doing business there. It is charged to the LLC or corporation itself, not to the owner, and many states charge it whether or not the business made money. That is the part that catches new owners out: a company with no profit can still owe hundreds of dollars a year.

States use the name loosely. Some franchise taxes are flat fees. Some are a tax on income. Some are measured on revenue, net worth or the number of shares. And some states charge similar taxes under other names. StructureCost counts all of them as entity taxes and adds them to the yearly cost of each structure they apply to.

California: $800 a year, and more for LLCs with revenue

The California Franchise Tax Board charges every LLC doing business in California an $800 annual tax, every year, including the first. The first-year exemption only covered tax years 2021 to 2023.

LLCs also pay an LLC fee on top, based on total California income:

S corporations pay a different tax: 1.5% of net income, with an $800 minimum. An LLC that elects to be taxed as an S corp pays the 1.5% tax and drops the LLC tax and fee. A California LLC with $150,000 of profit and $200,000 of revenue pays $800 as an LLC and $2,250 as an S corp.

Texas: margin tax with a $2.65 million no-tax-due line

The Texas franchise tax is a tax on margin, charged to LLCs, partnerships and corporations. Sole proprietors and general partnerships made up of natural persons are not taxable entities.

• For the 2026 and 2027 reports, an entity with total revenue at or below $2.65 million owes no tax.
• It still files the Public Information Report every year, due May 15.
• Above the threshold, the rate is 0.75% of taxable margin, or 0.375% for retail and wholesale.
• Margin is the lowest of 70% of revenue, revenue minus cost of goods sold, revenue minus compensation, or revenue minus $1 million.

Most small Texas businesses owe nothing but the report. Texas has no personal income tax, so the franchise tax is the main state tax a growing business meets.

Delaware: $400 for LLCs from 2026

Delaware charges every LLC a flat annual LLC tax, whatever its income. It rose from $300 to $400 starting with tax year 2026, and the 2026 tax is due June 1, 2027. It is not prorated for a partial year. Paying late adds a $200 penalty.

Delaware corporations pay a franchise tax with a minimum of $175 under the authorized shares method, for 5,000 shares or fewer. Corporations with millions of authorized shares, which is common for startups, usually file under the assumed par value capital method instead, with a $400 minimum. The maximum is $200,000.

Tennessee: franchise and excise tax

Tennessee charges two taxes that LLCs and corporations both pay:

• Franchise tax: 0.25% of Tennessee net worth, with a $100 minimum, owed even by inactive entities.
• Excise tax: 6.5% of Tennessee taxable income.

Tennessee does not follow the S election for these taxes. An LLC or S corp pays excise tax on its income just as a C corp does. Sole proprietors and general partnerships don't owe either tax. In Tennessee the cheapest structure on paper is often the one with no entity at all.

Taxes on gross receipts

A few states tax revenue rather than profit. They hit low-margin businesses hardest, because a business can owe while losing money.

How StructureCost handles them

Each state page lists the entity taxes that state charges, which structures they hit and the official source. A flat tax goes straight into the yearly cost. A tax on income or revenue is worked out from the profit and revenue you enter. Local taxes, such as city gross receipts taxes in San Francisco or Los Angeles, are not modelled.