A Franchise Tax is a tax that is imposed on Corporations or LLCs by some states for the privelige of doing business in the state.

A Franchise Tax may be based upon corporate assets, total value of outstanding shares, a combination of the above, or the Franchise Tax may be a flat fee.

In some states, including California, the Franchise Tax is an indirect income tax. Some states, like Delaware, have a significant Franchise Tax. Other states have a small Franchise Tax, or, like Nevada, have no Franchise Tax at all. Some states, like Texas, have no Corporate income tax but have a high Franchise Taxes.

Generally, states with higher Corporate income taxes usually have low Franchise Taxes.

Failure to pay the Franchise Tax may result in the Administrative Dissolution of the company and forfeiture of the corporate charter.