State taxes on the entity

Federal pass-through status doesn't bind the states. Some tax the entity itself, whatever the IRS calls it. California is the example most founders meet: every LLC classified as a partnership or disregarded that does business in California, or is organized or registered there, owes an $800 annual tax — and on top of it a fee once its total California income reaches $250,000.

Corporations meet the same idea as a minimum franchise tax: California's corporation minimum, Delaware's franchise taxEntity & complianceDelaware franchise taxThe annual tax every Delaware corporation owes for the privilege of being incorporated there, whether or not it does business or makes money there — the lower of the authorized shares method and the assumed par value capital method, minimum $175 or $400, maximum $200,000, due with a $50 annual report by March 1 and prorated in the first year on every Delaware corporation, and other states' taxes on capital or gross receipts. Which states a company owes, and how its income is apportionedTaxApportionmentDividing a multistate business's taxable income among states by formula — historically property, payroll and sales; now in most states the sales factor alone among them, is the compliance track's state income and franchise taxesCompliance & tax · Lesson 5 of 10State income and franchise taxes: one idea, many namesWhich state taxes does a startup corporation owe, and why are they called different things?Income tax, franchise tax, gross receipts tax, margin tax: what eight states levy on a corporation, and how to tell which one you owe.9 min lesson; each state's own figures are in the state guides.