Every state that lets you register a corporation or an LLC also charges you a yearly fee to keep it registered. Most states call this a franchise tax. Some call it a license tax or an annual tax. The name changes. The idea does not.
The word "franchise" confuses people every time. This tax has nothing to do with running a franchise business, like a fast food location or a gym chain. It is an old legal term for the privilege of existing as a company in a state. You pay it because your corporation or LLC is registered there, not because you sold anything, hired anyone, or made a profit.
This matters for founders outside the United States more than almost any other rule in this guide. Most U.S. taxes are tied to income. If you made no money, you often owe no income tax. Franchise tax does not work that way. It is due even in a year with zero revenue, and even if the company never opened a bank account.
What the law actually charges you for
Each state sets its own formula, and the formulas are not close to each other. We will walk through the three states founders use most.
Delaware corporations
Delaware corporations owe an annual franchise tax under 8 Del. C. §501 and §503. The state gives you two ways to calculate it, and lets you pay whichever number is lower.
The Authorized Shares Method counts the number of shares your certificate of incorporation authorizes, not the number you actually issued. The Assumed Par Value Capital Method uses your total gross assets and the number of shares actually issued. Section 503 sets a floor under each method and a cap on the total, plus a higher cap for companies the statute calls "large corporate filers."
The two methods can produce very different bills for the same company. A company that authorized a large number of shares but holds few assets usually pays far less under the Assumed Par Value Capital Method, so run both. Delaware's own calculator does the arithmetic for you; the link is at the bottom of this page.
We deliberately do not print the Delaware dollar figures here. Delaware House Bill 400 (153rd General Assembly, signed May 21, 2026, Chapter 85) adjusts a long list of Secretary of State fees and taxes, and most of those changes take effect August 1, 2026. Any number quoted in an article goes stale on that date. Check Delaware's current fee and tax schedule before you file.
The Annual Report and payment are due every year by March 1 (8 Del. C. §502). Filing late adds a statutory penalty on top of the tax.
Delaware LLCs
Delaware taxes LLCs under a different statute from corporations: 6 Del. C. §18-1107. Limited partnerships have their own parallel provision, 6 Del. C. §17-1109. There is no share count and no asset calculation. It is a flat annual tax, and the deadline is June 1, three months after the corporate deadline. Unpaid tax accrues statutory interest, and a missed payment adds a penalty.
The amount is in transition. House Bill 400 raised the flat annual tax, and that change took effect January 1, 2026. The statute says the tax is due on the first day of June following the close of the calendar year, so the payment you make in June 2026 covers calendar year 2025, and the payment you make in June 2027 covers calendar year 2026, the first year at the higher rate. During a transition like this, two pages on Delaware's own site can show two different numbers, because one reflects the amended statute and the other still reflects older payment instructions. Confirm the figure on Delaware's official payment page, and check which tax year it applies to, before you pay.
California
California charges a minimum tax to both corporations and LLCs, and the number looks the same on the surface: $800 a year. But the two rules come from different statutes, and that matters if you are trying to find an exemption.
Corporations owe it under Cal. Rev. & Tax. Code §23153, which sets the minimum franchise tax at $800 in subdivision (d)(1). A corporation that incorporates or qualifies to do business in California on or after January 1, 2000 is not subject to the minimum franchise tax for its first taxable year, under subdivision (f)(1). After that first year, the $800 applies every year regardless of income.
LLCs owe an annual tax in the same $800 amount under Cal. Rev. & Tax. Code §17941, which points back to the figure in §23153(d). It reaches an LLC doing business in California and an out-of-state LLC that registers with the Secretary of State. The registration statute, Corporations Code §17708.02(c), even requires the state to warn foreign LLCs on the application that registering obligates them to pay the §17941 tax.
The LLC statute does contain a first-year exemption, but a narrow one. Subdivision (g)(1) covers LLCs that organized or registered on or after January 1, 2021 and before January 1, 2024, and it is conditioned on a budget appropriation. An LLC formed today falls outside that window, so plan on paying the $800 in year one.
Wyoming
Wyoming does not have a franchise tax at all. What it has instead is a license tax, charged alongside the annual report, under W.S. §17-16-1630 for corporations and W.S. §17-29-209 for LLCs.
The formula is based on assets, not on shares or income. The Wyoming Secretary of State states it as $60 or two-tenths of one mill on the dollar ($0.0002), whichever is greater, applied to all assets located and employed in Wyoming. If your company holds no property, inventory, or equipment physically in Wyoming, which is the normal case for a company that only uses Wyoming as its state of registration, the calculation lands on the $60 floor. This is the main reason Wyoming markets itself as the cheapest state to keep a company registered in.
🇺🇸 If the IRS counts you as a U.S. person
None of this depends on your tax residency. Franchise tax is a state-level charge tied to where the company is registered, not a federal charge tied to who owns it.
If your company is a Delaware corporation, you owe the Delaware franchise tax by March 1, using whichever of the two formulas produces the lower bill. If it is a Delaware LLC, you owe the flat annual tax by June 1, at whatever rate applies to that tax year. If your company does business in California, or is registered there, you owe the $800 minimum; a corporation gets a first-year pass under §23153(f)(1), while an LLC formed today does not. If it is a Wyoming entity, you owe the license tax alongside your annual report, almost always at the $60 floor.
Being a U.S. citizen or a U.S. resident does not reduce, delay, or exempt you from any of these bills.
🌏 If it does not
Nothing changes for you either. The tax attaches to the company's certificate of incorporation or certificate of formation, filed with a specific state. It does not attach to the owner's passport, visa status, or tax residency.
A founder in Manila who forms a Wyoming LLC owes the same $60 license tax as a founder in Ohio who forms the identical LLC. A founder in Lagos who forms a Delaware corporation runs the same Authorized Shares Method calculation as a founder in California.
The one place your location does matter is logistics, not liability. If your registered agent does not forward state notices, or if you miss the filing because nobody told you the deadline passed, the state can revoke your company's good standing. That risk is the same one covered on the registered agent page, and it hits non-residents harder simply because a state letter mailed to an agent's office is easy to miss from overseas.
Where the two lanes actually differ
| Question | 🇺🇸 U.S. person | 🌏 Not a U.S. person |
|---|---|---|
| Do you owe franchise/license tax? | Yes | Yes |
| Does citizenship or residency change the amount? | No | No |
| Does the company's revenue change the amount? | No, except where the formula itself uses assets or shares | Same |
| What actually determines the bill | State of registration, entity type, and that state's formula | Same |
| Main risk from missing the deadline | Loss of good standing, late fees, eventual administrative dissolution | Same, plus harder to notice if the agent does not forward mail |
The table is short on purpose. This is one of the rare terms in this guide where the two lanes get exactly the same answer, because the tax is geometric: it follows the state of registration, not the person.
Common mistakes
🇺🇸 If the IRS counts you as a U.S. person
- Assuming a year with no revenue means no franchise tax is due. It does not. The Delaware and California minimums are charged whether or not the company earned anything.
- Running the Authorized Shares Method only, and missing that the Assumed Par Value Capital Method would have produced a lower Delaware bill.
- Confusing the corporate deadline (March 1 in Delaware) with the LLC deadline (June 1 in Delaware). They are different dates under different statutes.
🌏 If it does not
- Assuming this tax is somehow connected to the word "franchise" and does not apply because the company is not a franchise business. It applies to every corporation and LLC registered in the state.
- Missing the notice because it went to a registered agent who does not forward state mail, then finding out months later that the company lost good standing.
- Assuming a rate quoted online is still current. Delaware's LLC annual tax changed by statute effective January 1, 2026, and House Bill 400 moves another set of Delaware fees on August 1, 2026. Old figures are still printed in places that have not caught up.
FAQ
Is franchise tax the same as income tax?
No. Income tax is based on profit. Franchise tax is based on the fact that a corporation or LLC is registered in a state, and in some states, on figures like authorized shares or in-state assets. A company with zero income can still owe the full franchise or license tax.
Do I owe franchise tax if my company made no money this year?
Yes, in the states covered here. Delaware, California, and Wyoming all charge their minimum tax or license tax regardless of revenue.
Does my franchise tax bill change based on where I live?
No. The tax is tied to the state where your corporation or LLC is registered, not to your personal tax residency, citizenship, or immigration status.
Why is Delaware's LLC tax showing two different amounts online right now?
Delaware House Bill 400 raised the flat annual tax for LLCs and limited partnerships, effective January 1, 2026. Because the tax is due on the first day of June following the close of the calendar year, the payment you make in 2026 covers the 2025 tax year at the earlier rate, and the payment you make in 2027 covers the 2026 tax year at the new rate. Some official pages already show the amended statutory figure while others still show payment instructions written for the old one. Check the current tax year and rate directly before you pay.
Is Wyoming's license tax the same thing as a franchise tax?
Functionally, yes, even though Wyoming does not use the word "franchise." It is an annual charge for keeping the company registered, calculated on in-state assets or a $60 floor, filed alongside the annual report.
If my Delaware LLC has no assets and made no sales, do I still file and pay?
Yes. The Delaware LLC annual tax under 6 Del. C. §18-1107 is a flat amount due every year by June 1, with no exemption for zero activity.
Does California's first-year exemption apply to LLCs as well as corporations?
Not for an LLC you form now. The corporate exemption in §23153(f)(1) is open-ended: any corporation that incorporated or qualified on or after January 1, 2000 skips the minimum franchise tax in its first taxable year. The LLC exemption in §17941(g)(1) is time-boxed to LLCs that organized or registered on or after January 1, 2021 and before January 1, 2024. A newer LLC pays the $800 in year one.
What happens if I never pay franchise tax?
In Delaware, 8 Del. C. §510 says that if a corporation neglects or refuses for one year to pay the franchise tax, the charter is void and all powers conferred on the corporation become inoperative. That includes the power to bring or defend a lawsuit. Other states run a similar process under different names, usually ending in administrative dissolution. Reinstatement generally means paying the back taxes plus penalties.