A franchise tax is a tax levied by a government (most commonly a US state) to certain business entities, most commonly the corporation and the LLC. A franchise tax is in addition to the US federal taxation a startup encounters, and will typically apply to a startup when it has sufficient contact with such state such as employees in the state or an office. Some states base the franchise tax on revenue, but most base franchise taxes on the capitalization of the company or net assets of the company.
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