Franchise tax

Definition

A state's annual fee for keeping an entity alive; no franchise involved.

Why It Matters

The name has nothing to do with franchising: it is what several states charge a corporation or LLC for existing, and it lands on the entity a buyer forms to hold the business. The shape varies by state, from flat minimums to margin-based reports, and the deadline runs on the state's calendar rather than the IRS's. It matters because missing it can suspend or dissolve the entity, and the entity is the borrower on the loan and the counterparty on every contract you just signed. Put it on the compliance calendar the week the entity is formed.

In numbers: A California LLC owes the $800 minimum franchise tax every year it exists, and a Texas entity files a margin report even in years it owes $0; letting either lapse can suspend the entity that signed your SBA note.