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Franchise taxes are the taxes collected by state agencies. While the Federal government collects national taxes, each state has a state franchise tax board to oversee the collection of state taxes. State taxes are paid by both individuals and businesses operating within a designated state. If you have businesses in multiple states, you will need to keep track of the franchise tax owed to each franchise tax board.
Larger companies typically employ a Tax Advisor, whose function it is to provide guidance to the company about franchise taxes. This includes providing research and analysis of franchise tax planning, audits, and compliance. A Tax Advisor will actively seek to minimize the franchise taxes required to be paid, thereby increasing the shareholder value. This person works with people in various business units and interprets the impact of various procedures, proposals, legislation, and court decisions. Tax advisors will also work with government agencies (such as franchise tax boards) as well as outside organizations to influence proposed legislation in an attempt to reduce the tax burden.
*Depending upon the individual states in which you are doing business, you may need to pay taxes to each state franchise board.
Each state has its own requirements for how and when it collects taxes. Staying up to date on the ever-changing requirements and laws of multiple states can be a big burden for a small company. Corporations with offices in multiple states need to stay on top of the various requirements and deadlines. This can become burdensome. Before expanding your business into new territories across state lines, check with each state franchise tax board to understand your obligations.
The franchise tax board is a state government agency set up to collect personal and businesses taxes owed an individual state. The franchise tax board provides the necessary forms to file these taxes. You can often get the forms online, print them off on your home computer, and send them in with your franchise tax. Some forms, however, must be completed on an original state published form (many libraries carry these forms around tax time).
Many small businesses that do business in multiple states elect to outsource this type of work to franchise tax experts. Keeping track of the rules and requirements of various franchise tax boards can be overwhelming for small and even medium-sized businesses. Therefore, hiring a company with specialists in this area can be a good investment. Larger companies made up of tax specialists can apply their knowledge across multiple smaller companies, using their know-how to reduce franchise taxes.
|Jennifer Mathes, Ph.D.|