📋 What Is Franchise Tax — And Why Should You Care?

If your company is incorporated in the US — especially in Delaware, Texas, or California — you owe a Franchise Tax every year. This isn't about your profits. It's simply a fee for the right to exist and operate as a legal entity in that state.

Miss it, and you don't just get fined. Your company could lose its "good standing" status — which can block fundraising, contract signings, and even basic banking.

Zero revenue last year? You still owe Franchise Tax.

📅 Key Deadlines at a Glance

🏢 Delaware: What Most Indian Founders Owe

Delaware is where most Indian-founded US startups are incorporated. Here's the quick version:

• C-Corp? File your Annual Report + pay Franchise Tax by March 1.

• LLC or LP? Pay a flat $300 by June 1. No report needed, no extensions given.

• Late? That's a $200 penalty + 1.5% monthly interest — and no grace period.

One important tip for C-Corps: the default calculation method can produce an absurdly large tax bill based on authorized shares. Always use the Assumed Par Value Capital Method — it's almost always lower. Ask your advisor before you file.

⚠️ What Happens If You Miss the Deadline?

• Fines and mounting monthly interest

• Loss of good standing — investors and banks will notice

• VCs require a Certificate of Good Standing before closing any round

• Reinstatement is expensive and time-consuming

A missed deadline costs far more to fix than it does to file on time.

✅ Bottom Line

US Franchise Tax is one of those obligations that quietly shows up every year — and quietly causes big problems when ignored. Whether you're a founder with a Delaware C-Corp or an LLC across state lines, mark these dates on your calendar now.

Need help figuring out your obligations or filing on time? Reach out to us at prathik@bloomtreeadvisors.com — we handle the math so you don't have to.

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