A Franchise Tax is a fee that some states in the United States charge businesses for the privilege of operating within their jurisdiction. This tax is typically based on a company's revenue, net worth, or a flat fee, and it applies to various business structures, including corporations and limited liability companies (LLCs). The revenue generated from franchise taxes helps fund state services and infrastructure. Unlike income tax, which is based on profits, the franchise tax is assessed regardless of whether a business is profitable. Each state has its own rules and rates for franchise taxes, making it important for business owners to understand their specific obligations in their state, such as California or Texas.