US Franchise Tax Calculator (2026 State Rules & Fees)
A state franchise tax is not a conventional tax on business net profit; it is a privilege tax levied by state governments for the legal right to form, exist, or transact business within the state's borders. Jurisdictions calculate franchise taxes through drastically different statutory formulas. California mandates an $800 minimum tax plus graduated gross receipts fees for LLCs. Texas enforces a Margin Tax with a $2.47 million No-Tax-Due Threshold. Delaware imposes a flat $300 fee for LLCs while allowing corporations to choose between the Authorized Shares and Assumed Par Value Capital methods. This calculator models your precise annual state franchise tax obligation and filing deadlines.
State Franchise Tax & Privilege Tax Calculator (2026 Legal Rules)
A state franchise tax is not a tax on corporate profit; it is a privilege fee paid for the right to exist and do business in a state. This tool models complex jurisdictional rules including the Texas $2.47M No-Tax-Due Threshold, California $800 minimum & LLC gross receipts fees, and Delaware Authorized Shares vs Assumed Par Value Capital methods.
How this calculator works
How it works
- 01Select State & Entity: Choose your incorporation or operating state (California, Texas, Delaware, New York, Nevada, Tennessee, or North Carolina) and legal classification (LLC, C-Corp, or S-Corp).
- 02Enter Financial Metrics: Input annual gross revenue, cost of goods sold (COGS), compensation, net taxable income, and balance sheet net worth.
- 03Delaware Corporate Optimization: For Delaware corporations, automatically calculates both the Authorized Shares Method and Assumed Par Value Capital Method, selecting the lowest legal tax obligation.
- 04Texas Margin Tax Computation: Evaluates the Texas $2,470,000 threshold ($0 tax if under); if over, identifies the most advantageous statutory margin deduction (70% revenue, COGS, compensation, or EZ computation).
- 05California Minimums & Tiered Fees: Computes California's mandatory $800 annual tax (with first-year corporate exemption check) plus LLC gross receipts fee brackets ($900 to $11,790).
- 06Filing Deadlines & Compliance: Details exact calendar statutory due dates and reporting forms (e.g. Form 3522, PIR 05-102, Delaware March 1 Annual Report).
Tax rules that apply
- •Franchise Tax vs Income Tax: Income taxes are levied on net profits, so a business with no profit pays zero income tax. In contrast, franchise taxes are privilege fees: in states like California, an LLC must pay the $800 minimum franchise tax every single year, even if the business was completely inactive or sustained large losses.
- •Texas $2,470,000 No-Tax-Due Threshold: Under Texas SB 3 / HB 500 reforms, entities with total annualized revenue under $2.47 million owe $0 franchise tax and are no longer required to file the No-Tax-Due Information Report (Form 05-163), filing only the Public Information Report.
- •Delaware Founder Stock Trap: Founders who incorporate in Delaware with 10,000,000 authorized shares often receive an alarming $85,000+ franchise tax bill under the default Authorized Shares Method. Filing under the Assumed Par Value Capital Method using actual gross assets reduces the fee to as low as $400.
- •Foreign Entity Registration: Incorporating in Delaware or Wyoming does not exempt you from home-state franchise taxes. If your business operates in California, Texas, or New York, you must register as a 'foreign entity' and pay full franchise taxes in both states.
Current Tax Rates
| Tax / Deduction | Rate | Notes |
|---|---|---|
| California LLC Minimum Tax | $800 / year | Form 3522 due April 15 regardless of profit/activity |
| California LLC Gross Receipts Fee | $0 – $11,790 | Applies to total CA income starting at $250,000 |
| Texas No-Tax-Due Threshold | $2,470,000 | Revenue under $2.47M pays $0 franchise tax |
| Delaware LLC Annual Tax | $300 flat | Due June 1 annually (no annual report required for LLCs) |
| Delaware Corporate Min Tax | $175 – $400 | Authorized Shares ($175 min) or Assumed Par ($400 min) + $50 |
| Tennessee Franchise Rate | 0.25% | Applied to apportioned net worth (minimum $100) |
What this calculator assumes
- Reflects 2026 statutory rates, thresholds, and administrative rules from state revenue departments.
- Assumes 100% of business activity and receipts are apportioned to the selected jurisdiction.
- Delaware corporate modeling assumes standard capital structure and par value metrics.
- Does not model county or municipal business license taxes (e.g. Los Angeles city business tax).
Where our numbers come from
These calculators are based on official government tax rates and rules. We link directly to the source so you can verify everything yourself.
California FTB — Corporation and LLC Filing Requirements (Form 100 & 568)
California Franchise Tax Board
Texas Comptroller — Franchise Tax Overview & Thresholds (Tax Code Chapter 171)
Texas Comptroller of Public Accounts
Delaware Division of Corporations — Annual Franchise Tax Calculations
Delaware Department of State — Division of Corporations
Frequently Asked Questions
What is a state franchise tax and why do businesses have to pay it?
A franchise tax is not an income tax on profit; it is a privilege fee levied by a state for the right to exist as a chartered legal entity (like an LLC or corporation) or conduct business within that state. Even if your company operates at a net loss or makes zero dollars in revenue, most franchise tax states still require payment of a statutory annual minimum tax to keep the company in legal good standing.
How does California's $800 minimum franchise tax work?
Under California Revenue and Taxation Code § 23153, every LLC, LP, LLP, and corporation registered in California must pay an annual minimum franchise tax of $800. For LLCs, this $800 fee is due on the 15th day of the 4th month of the tax year (April 15 for calendar filers) via FTB Form 3522. Additionally, LLCs with California gross receipts of $250,000 or more must pay an annual LLC fee ranging from $900 to $11,790. Note: First-year corporations receive an exemption from the $800 tax for their initial year.
Do small businesses have to pay franchise tax in Texas?
Most small businesses in Texas owe $0 in franchise tax! For 2024 through 2026 reports, Texas established a $2,470,000 No-Tax-Due Threshold under Senate Bill 3. If your annualized total revenue is under $2.47 million, your franchise tax liability is zero. Furthermore, qualifying businesses under the threshold no longer have to file the No-Tax-Due Information Report (Form 05-163), needing only to submit the annual Public Information Report (PIR) by May 15.
How do I avoid Delaware's massive $85,000+ corporate franchise tax bill?
Delaware calculates corporate franchise taxes using two legal methods: the Authorized Shares Method and the Assumed Par Value Capital Method. The default Authorized Shares Method charges based on the number of authorized shares, which can produce a tax of over $85,000 for startups that authorized 10,000,000 shares. By using the Assumed Par Value Capital Method (which uses your company's gross balance sheet assets and issued shares from Form 1120 Schedule L), your tax bill will typically drop to between $400 and $1,200.
What happens if a company fails to pay its state franchise tax on time?
Failing to pay annual franchise taxes and file annual reports triggers monetary penalties (typically 5% to 10% per month) plus interest. If left unpaid, the state Secretary of State will revoke the entity's charter or forfeit its corporate powers (known as 'administrative dissolution' or 'loss of good standing'). When an entity loses good standing, owners can lose their limited liability protection, contracts become voidable, and banks may freeze corporate accounts.
If I form an LLC in Delaware, do I still have to pay franchise tax in my home state?
Yes. Forming an entity in Delaware or Nevada does NOT excuse you from paying taxes where your business actually operates. If you live or conduct business in California, Texas, New York, or any other state, you must register your Delaware LLC as a 'foreign entity' in that home state. This means you will owe Delaware's $300 annual franchise tax AND your home state's franchise/income taxes (such as California's $800 minimum tax).
