LLC Annual Report and Franchise Tax: What Your State Charges Every Year

The thing nobody says out loud at formation is that an LLC is a subscription. You pay to start it, and then you pay to keep it, every year, whether or not it did anything.

The formation guides all end at "congratulations, your LLC exists." This is the part after that — the recurring bill, the calendar it runs on, and what the state does when you stop paying.

This is general information, not legal or tax advice. Annual report rules and franchise tax rates are set state by state, and several of them change every year. For your specific situation, check your state's filing office and revenue department, or ask a lawyer or CPA.

What an annual report actually is¶

An annual report is a confirmation that your entity's public record is still accurate. Name, principal address, registered agent and their address, and depending on the state, the names of members or managers. That's it. Most states let you file it online in under ten minutes, and most of the ten minutes is finding your login.

The name changes at the state line. California calls it a Statement of Information. Georgia calls it an annual registration. Indiana calls it a Business Entity Report. Several states call it a periodic report. Texas doesn't have one at all in the usual sense — it has a franchise tax report with a Public Information Report attached, which does the same job through a different agency.

Two things surprise people about it.

The first is that it isn't financial. Nobody at the Secretary of State wants your revenue, your profit, or your books. The annual report is an address-verification exercise with a fee stapled to it. If you were bracing for an accounting exercise, relax; if you were assuming it counts as your tax filing, it does not.

The second is the fee. In several states the annual report costs more than forming the company did. Massachusetts charges $500 a year for an LLC annual report — the same as its formation fee, every single year. California charges $70 to file Articles of Organization and a minimum of $800 a year to keep the entity alive. The one-time cost is the advertised number. The recurring cost is the real one.

Franchise tax is a fee for existing¶

Here is the concept that costs small business owners the most money, because it is genuinely counterintuitive: franchise tax is not a tax on income. It has nothing to do with franchises either. It is a fee for the privilege of having a registered entity in that state — for existing there, in the eyes of the law, with a liability shield around you.

Which means it does not care that you had a bad year. It does not care that you had no year at all. An LLC that was formed in March, never opened a bank account, never invoiced a client, and sat completely dormant still owes the same minimum franchise tax as a company doing $200,000. In most states with one, dormancy is not a defense and "we had no activity" is not a filing status.

“Franchise tax is not a tax on what you earned. It's rent on the fact that you exist.”

The three ways states compute it¶

Every franchise tax in the country is some version of one of these, and knowing which one your state uses tells you almost everything about what you'll owe.

1. A flat fee. You owe the same number as everyone else with your entity type. Delaware charges its LLCs, LPs and GPs a flat $400 a year. Arkansas charges its LLCs a flat annual franchise tax. Flat fees are the easiest to plan around and the most annoying to pay in a bad year, because the bill arrives at full price regardless.

2. Revenue or gross receipts based. The state taxes money that came in, before you subtract anything. Texas computes franchise tax on taxable margin, with a no-tax-due threshold in the millions — most small businesses fall under it and owe nothing, but they still have to file. California stacks a separate LLC fee on top of the $800 minimum, tiered on total California-source income starting at $250,000. New York charges LLCs an annual filing fee scaled to New York-source gross income. The mechanism to internalize: gross receipts, not profit. A business with $500,000 of revenue and $10,000 of profit is treated like a $500,000 business.

3. Capital or net worth based. The state taxes the size of your balance sheet — issued shares, stated capital, or net worth. Delaware corporations are the famous case: the authorized-shares method starts at a $175 minimum and climbs fast if someone authorized ten million shares because a template suggested it. Tennessee computes franchise tax on net worth, with a small flat minimum of around $100 regardless of how little that net worth is. This is the method that produces the shocking first bill, and it's almost always fixable by amending the thing being measured rather than by earning less.

AZ / MO / NM / OH / SC — no report0

Pennsylvania — annual report7

Florida — annual report138.75

Delaware — flat LLC tax400

Massachusetts — annual report500

California — minimum franchise tax800

Those are the figures at the time of writing and they are the ones to verify, not the ones to budget on. Report fees get adjusted, thresholds get indexed, and at least one state changes something material every legislative session. The number belongs to your Secretary of State and your Department of Revenue. Look it up once a year when you file, not once ever.

The states that catch people out¶

Three patterns account for most of the surprises.

States with a substantial flat minimum. These are the ones where a dormant LLC is genuinely expensive. California's $800 minimum is the headline — it applies to LLCs and corporations, it applies whether or not you made a dollar, and it is the single most common reason someone forms an LLC in California, does nothing with it, and gets a bill they didn't budget for. Delaware's flat $400 LLC tax is smaller but hits every one of the many LLCs formed there by people who don't live there, and a late one adds a $200 penalty plus 1.5% a month. Nevada charges an annual list fee plus a state business license, which together run into the hundreds. Massachusetts asks $500 for the annual report itself. Tennessee's LLC annual report is priced per member with a minimum in the hundreds, so a four-person LLC pays more than a one-person LLC for identical paperwork.

States with no annual report at all. Arizona, Missouri, New Mexico, Ohio and South Carolina do not require a standard for-profit LLC to file one. This is a real saving and also a real trap, because "no annual report" is not "nothing to do." Ohio has a commercial activity tax. South Carolina wants a filing from LLCs taxed as S-corps. All five still expect you to maintain a registered agent, keep local licenses current, and file taxes. Delaware belongs in an odd corner of this group: its LLCs file no annual report whatsoever, and owe $400 every June 1 anyway.

States on a biennial cycle. California, New York, Alaska, Indiana, Iowa, Nebraska and Washington, D.C. run reports every two years rather than annually. Filing half as often sounds like a gift. In practice the off year is where the memory dies — you file, you feel current, twenty-four months pass, and there is no annual rhythm to catch it. If your state is biennial, the calendar entry matters more, not less.

Why the deadline is the part that gets you¶

Almost nobody misses an annual report because they refused to pay $50. They miss it because they had no idea what day it was due. States use three completely different clocks, and the difference is the single largest cause of missed filings.

Anniversary-based. Due on or near the date — or in the month — your entity was formed. Massachusetts uses your formation anniversary. Nevada uses the last day of your anniversary month. New York's biennial statement is due in your anniversary month. This clock is invisible: it isn't printed on a calendar anywhere, it's different for every company, and if you formed on a random Tuesday in November you now have a compliance deadline on a random Tuesday in November forever.

Fixed-date. Same day for everybody. Florida's annual report is due May 1. Delaware's LLC tax is due June 1, and its corporate annual report and franchise tax are due March 1. Texas franchise tax reports are due May 15. Pennsylvania LLCs file by September 30. These are the easy ones — one date, no arithmetic — and they're still missed constantly because the date has nothing to do with anything else in your year.

Tax-year-based. Tied to your fiscal year rather than the calendar or your formation date. California's $800 minimum franchise tax is due the 15th day of the fourth month of the taxable year — April 15 for a calendar-year filer, and something else entirely if you're not one. Tennessee's LLC annual report is due the first day of the fourth month after fiscal year end. This clock moves if your fiscal year moves, which is exactly the sort of change a company makes without telling its compliance calendar.

What actually happens when you miss one¶

It is not a single event. It's a sequence, and each stage is meaningfully worse than the one before it.

1. 1

   A late fee, which is often disproportionate

   The penalty is frequently larger than the filing. Florida charges a $400 late fee on a $138.75 report, and it is non-waivable by statute — file on May 2 instead of May 1 and you owe $538.75, with no appeal and no hardship exception. Other states charge interest, per-month penalties, or a flat reinstatement-grade fee. This is the cheap stage.

2. 2

   You stop being in good standing

   Your entity gets flagged delinquent, or not in good standing, or whatever your state's word is. This status is public and searchable, and it is checked more often than people expect: by banks during account opening, by lenders underwriting a loan, by landlords, by insurers, and by any enterprise customer running vendor onboarding. You also lose the ability to get a certificate of good standing, which you need to open accounts, close financing, or register in another state.

3. 3

   You may lose access to the courts

   In many states, an entity that is delinquent, dissolved, or doing business without being properly registered cannot bring or maintain a lawsuit in that state's courts until it cures the default. The rules vary — some states bar suing but preserve the right to defend, some limit a dissolved entity to winding-up matters — but the practical effect is uniform and badly timed. You discover it when you try to enforce an unpaid invoice or a contract, which is to say at the exact moment you need the entity to work.

4. 4

   The state administratively dissolves you

   After a grace period — a few months in some states, a couple of years in others — the state stops recognizing the entity. Florida dissolves delinquent entities in the fall of the same year the report was due. Administrative dissolution is not a court proceeding and nobody argues it; a clerk applies a statute.

5. 5

   The liability shield goes with it

   This is the part that matters. The LLC was the wall between the business and your personal assets. Once the state has dissolved it, you are generally still trading — just not through a registered entity. Business done after that point can be treated as done by you personally, or as a general partnership if there are two of you. Most states allow reinstatement, and in many of those the reinstatement relates back as if nothing lapsed. Most is not all, the window closes, and the gap year is not a thing you want a court deciding about.

6. 6

   Reinstatement, which costs more than compliance did

   Reinstating means filing every missed report, paying every missed fee and penalty, often clearing tax obligations with a separate agency, and paying a reinstatement fee on top. In the meantime somebody else may have taken your business name, in which case you get to pick a new one. Three years of a $50 report is $150. Three years of neglect plus reinstatement is a multiple of that and an afternoon of paperwork.

Every extra state multiplies all of it¶

If you foreign qualify in another state — register your existing LLC to do business there — you don't get a discount for already having filed at home. You get a second full set of obligations. Its own annual report, its own fee, its own deadline, its own franchise tax on its own clock, and its own registered agent.

Foreign qualification is usually triggered by physical presence: an office, a warehouse, a storefront, employees, or repeated in-person work in the state. Having customers there generally isn't enough on its own; a remote employee living there very often is, and that one catches a lot of small companies.

The arithmetic gets ugly quickly. Five states means five reports, five fee schedules, five due dates on three different kinds of clock, and five chances a year to fall out of good standing somewhere you don't visit. It is also the strongest practical argument for forming in the state you actually operate in rather than chasing a jurisdiction with a reputation. A Delaware LLC run from Ohio is two sets of filings and two annual bills to do the work of one.

The federal layer runs on a different clock¶

Alongside all of this, the federal government wants its own filings — and it is worth being clear that they are a separate system with separate consequences.

Income tax returns. A multi-member LLC files Form 1065 and issues K-1s. A single-member LLC generally reports on Schedule C with the owner's Form 1040. An LLC that elected S-corp treatment files Form 1120-S. Partnership and S-corp returns are due March 15 for calendar-year filers; individual returns are due in April.

Employment filings, if you have anyone on payroll: quarterly Form 941, annual Form 940, W-2s and 1099-NEC forms out by January 31.

Estimated taxes, quarterly, if you expect to owe — the mechanism behind most surprise April bills for people newly paying their own self-employment tax.

The important structural difference: the IRS does not dissolve your company. Federal filings are about income; state annual reports and franchise taxes are about existence. Miss the federal ones and you get penalties and interest from a creditor with strong collection powers. Miss the state ones and the entity itself goes away. They are separate obligations with separate deadlines, and neither one satisfies the other. Your EIN is also not a registration — it never expires and it does nothing to keep the entity in good standing.

Build the calendar once¶

This is a thirty-minute job that you do a single time, and it removes an entire category of business risk.

1. 1

   Look up your actual obligations on a .gov page

   Two searches: your state plus "annual report" on the Secretary of State site, and your state plus "franchise tax" on the Department of Revenue site. Write down, for each: what's due, how much, which office, and what clock it runs on. If you're qualified in more than one state, repeat for every one of them. Do not take this from a formation service's blog post.

2. 2

   Find your anniversary date and write it down somewhere permanent

   Pull up your entity on the state's business search and find the formation or registration date. In anniversary states that date is your deadline, forever, and it exists nowhere in your normal working life. Put it in the same document as your EIN and your entity number.

3. 3

   Set two calendar reminders per filing, not one

   One at 45 days out and one at 10 days out, recurring annually — or every two years, with the correct start year, in a biennial state. The 45-day alert is for gathering information and noticing that something changed. The 10-day alert is the one that actually gets it filed.

4. 4

   Budget the recurring cost as a line item

   Put the total annual state cost into your bookkeeping as a fixed expense on the month it's due, the same way you'd treat insurance. This is the step that turns an $800 surprise into a $67-a-month known quantity, and it stops the bill from arriving during a slow quarter as a decision.

5. 5

   File the change the day something changes

   New address, new registered agent, a member in or out, a new state of operation. Waiting for the annual report to fix an address is how the next year's notice goes to the wrong place. Most states let you amend mid-year for little or nothing.

6. 6

   Check your standing once a year, on the same day you file

   Look yourself up on the state business search and confirm the record says active or good standing. Two minutes. It is the only reliable way to catch a filing that silently failed, a payment that didn't post, or a delinquency notice that went to an address you no longer read.

Whether you pay someone to do this is a genuine question rather than an obvious one.

Frequently asked questions¶

The short version¶

Formation is a purchase. Everything after it is a subscription, and the subscription has two lines on it: a report that proves the state still knows where to find you, and, in a lot of states, a fee you owe for existing whether or not you traded.

Know which of the three clocks your state runs on. Put two reminders per filing in a calendar you actually look at. Budget the recurring cost as a fixed expense instead of a surprise. Look yourself up once a year and confirm the record says what you think it says.

The failure mode here isn't a fine. It's a company that quietly stopped existing sometime last year, while you kept signing contracts in its name. It's just business — pay the subscription.

Sources

1. U.S. Small Business Administration — Stay legally compliant
2. IRS — Limited Liability Company (LLC)
3. FinCEN — Beneficial Ownership Information Reporting
4. California Franchise Tax Board — Limited liability company
5. California Secretary of State — Statements of Information
6. Delaware Division of Corporations — LLC/LP/GP Annual Tax Instructions
7. Texas Comptroller of Public Accounts — Franchise Tax
8. Florida Division of Corporations — Annual Report Filing
9. Pennsylvania Department of State — Annual Reports
10. Tennessee Department of Revenue — Franchise and Excise Tax