LLC & Corporate Franchise Tax

[AmyBass 0]

Does an LLC pay Corporate Francise Tax to the state if all the profits are passed onto the member(s)? Just wondering if the Corporate Franchise tax was only for C-Corps? What role does the franchise tax play in LLC's?

[Dave T 0]

The answer to your question is state specific. The corporate franchise tax is assessed by the state, if applicable to you. The tax is not usually based upon business income, but is a flat fee. For example, in Mississippi, the franchise tax is $25 regardless of the actual income earned by the business entity.

 

If I may draw an analogy. I pay a renewal fee every year for my automobile license plate. Even though my state does not actually issue a new plate, I pay a small fee to maintain the plate I have. Think of the franchise tax as an annual renewal fee that your state charges for the business you registered.

 

No, the franchise tax is not just for corporations. It applies to LLCs too.

[AmyBass 0]

The answer to your question is state specific. The corporate franchise tax is assessed by the state, if applicable to you. The tax is not usually based upon business income, but is a flat fee. For example, in Mississippi, the franchise tax is $25 regardless of the actual income earned by the business entity.

 

If I may draw an analogy. I pay a renewal fee every year for my automobile license plate. Even though my state does not actually issue a new plate, I pay a small fee to maintain the plate I have. Think of the franchise tax as an annual renewal fee that your state charges for the business you registered.

 

No, the franchise tax is not just for corporations. It applies to LLCs too.

 

The LLC would be in the state of Utah and from what I understand the Franchise Tax is 5%.

[Dave T 0]

Then it sounds like an income tax. Again, the franchise tax is state specific. Not every state has a franchise tax.