Operating a private practice is an exciting journey, and as a business owner, you must also comply with state requirements. While Heard supports your filing of business and personal income tax, we do not support filing Franchise Tax or Excise Tax reports. This article outlines these tax requirements - please refer to your state website for more information.
What is franchise tax?
A franchise tax is a state-level tax imposed on corporations for the privilege of conducting business within a specific state. It serves as a fee for the right to operate a business entity.
Who is required to pay franchise tax?
Each state determines which businesses pay franchise tax; typically, corporations, such as S Corps, are the primary payers of franchise taxes. Some states may impose franchise taxes on certain types of partnerships or limited liability companies (LLCs).
How is Franchise Tax calculated?
The tax amount is usually determined by factors like the corporation's capital stock, net worth, or income. In contrast to a state income tax—which is calculated based on the business's profits—some state franchise taxes may be assessed as a flat fee.
Can Heard provide the calculation?
No, at this time, Heard does not provide support with Franchise or local/city taxes.
Franchise tax is a state-imposed tax and is not included in quarterly income tax estimates or quarterly payroll taxes.
Which states impose a franchise tax?
As this varies significantly from state to state, we recommend reviewing your state agency for the most up-to-date information.
Should I pay Franchise Tax from a business account?
Yes, you should pay franchise taxes from a business bank account. This is considered a business expense and should be reflected in your practice books.
Avoid penalties
It’s important to stay up to date on state requirements for Franchise Tax and pay the tax by the due date in order to avoid penalties and interest.