Short answer: Arizona does not have a franchise tax. There is no annual fee just for the privilege of existing as a business in this state, the way there is in California or Delaware. If you searched "Arizona franchise tax" hoping to find a line item to budget for, you can stop looking for one.
That doesn't mean your business owes nothing. Arizona replaces the franchise tax model with a different mix of obligations, and which ones apply to you depends heavily on whether you run an LLC or a corporation. Get that distinction wrong and you either miss a real filing or waste money on one that doesn't apply to you.
Key Takeaways
- Arizona has no franchise tax and no general gross receipts tax. Neither LLCs nor corporations pay a fee simply for being registered to do business.
- LLCs owe the Arizona Corporation Commission (ACC) nothing annual. No annual report, no annual fee, full stop.
- Corporations do file an annual report with the ACC: $45 per year for for-profit corporations, $10 for nonprofits.
- A new 2026 ACC policy affects dormant LLCs specifically: entities with no filings in two years may receive an "Attestation of Existence" request, separate from any franchise-style fee.
- What businesses actually pay: 4.9% corporate income tax (C-corps), a flat 2.5% individual rate on pass-through income, Transaction Privilege Tax if you sell taxable goods or services, payroll taxes if you have employees, and county tax on business personal property above a $500,000 exemption (up from roughly $270,000 in 2025).
Does Arizona have a franchise tax?
No. States like California charge LLCs and corporations a minimum franchise tax just for being registered, regardless of profit. Arizona doesn't do this. The Arizona Corporation Commission, which handles business registration, doesn't charge either entity type an ongoing fee tied to existence alone.
Where the confusion comes from: Arizona corporations do have one annual filing obligation (more on that below), and people conflate that with a franchise tax because it recurs every year and has a dollar amount attached. It isn't the same thing. A franchise tax is typically calculated on capital, net worth, or a flat minimum regardless of activity. Arizona's corporate annual report is a much smaller administrative filing fee, and LLCs don't have to file it at all.
What LLCs owe the state each year (not much)
If you run an Arizona LLC, here's the entire list of what the ACC requires from you on an ongoing basis: nothing. According to the Arizona Corporation Commission's own FAQ, LLCs are not required to file annual reports, and only corporations are. There's no annual fee attached to simply keeping an LLC registered.
That's unusual. Most states require some kind of periodic report and fee for LLCs. Arizona is one of a small number that doesn't, which is part of why it's a popular formation state for holding companies and real estate LLCs.
This doesn't mean an LLC is maintenance-free. You still need to:
- Maintain a statutory agent with a current Arizona address at all times
- Keep your principal address current with the ACC
- File Articles of Amendment if your name, members, or managers change
- Handle your actual tax obligations separately, which we cover below
None of those are franchise-tax-style fees. They're compliance tasks, and skipping them can still get an LLC administratively dissolved even though no annual report was ever required.
What corporations owe that LLCs don't
Corporations, both for-profit and nonprofit, do have one obligation LLCs don't: an annual report filed with the ACC. Per the Arizona Corporation Commission, the fee is $45 per year for a for-profit corporation and $10 per year for a nonprofit corporation. Miss the deadline and a for-profit corporation accrues a $9-per-month penalty; miss it long enough and the ACC will administratively dissolve the company.
This is the closest thing Arizona has to a "franchise tax," and it still isn't one. It's a flat, modest administrative fee tied to a specific filing, not a tax calculated on income, capital, or net worth. If you're choosing between an LLC and a corporation partly to avoid this fee, know that $45 a year is unlikely to be the deciding factor. The real cost differences between entity types show up in how profit gets taxed, not in ACC filing fees.
New in 2026: the LLC "attestation of existence" wrinkle
Here's something most articles on this topic won't mention, because it's brand new. In May 2025, the ACC adopted several anti-fraud policies, one of which specifically targets dormant LLCs. Starting with the rollout of the Commission's new online filing system, the ACC will identify LLCs that haven't filed anything in two years and send an electronic notice asking the statutory agent or owner to confirm the entity is still active. If nobody responds within 60 days, the LLC's status changes to "pending inactive," and administrative dissolution follows about 120 days after that.
It's a one-click confirmation for LLCs that have gone completely quiet with the state, aimed at cleaning up abandoned entities and reducing filing fraud, not a fee or a tax in its own right. But if you're sitting on an old holding LLC you formed years ago and haven't touched since, it's worth knowing this exists so a routine notice doesn't turn into an accidental dissolution.
What every Arizona business actually pays
Since there's no franchise tax to plan around, here's what actually shows up on an Arizona business's tax calendar:
Corporate income tax. C-corporations pay 4.9% of Arizona taxable income, with a $50 minimum tax. Returns are due the 15th day of the fourth month after your tax year closes.
Individual income tax on pass-through income. LLCs, S-corps, and partnerships don't pay entity-level Arizona income tax. Profit passes through to the owners, who pay Arizona's flat 2.5% individual rate on their share, regardless of income level.
Transaction Privilege Tax (TPT). If you sell a taxable product or service in Arizona, you need a TPT license from the Arizona Department of Revenue, plus any applicable city license. TPT is technically a tax on the seller for the privilege of doing business, not a sales tax on the buyer, though most businesses pass the cost through in the sticker price.
Payroll taxes. Any business with employees withholds state income tax, plus federal and state unemployment insurance and FICA obligations. If you've elected S-corp taxation to manage self-employment tax, payroll has to be run correctly and consistently for that election to hold up, which is where a dedicated payroll service usually pays for itself.
County property tax on business personal property. Equipment, furniture, and fixtures used in your business are subject to county personal property tax, but only above an exemption threshold. That threshold jumped significantly this year: for tax year 2026, the exemption is $500,000 of full cash value, up from roughly $270,000 the year before, following Senate Bill 1069. Most small businesses now fall entirely under the exemption and owe nothing on this front, though you still have to file the underlying Business Property Statement each year to claim it, which is exactly the kind of recurring filing good bookkeeping keeps from slipping through the cracks.
Add those up and you get an ordinary income, transaction, payroll, and property tax bill, not a franchise tax. Which ones actually apply to you depends on how your entity is structured and what it does day to day.
LLC vs. corporation: what you owe, side by side
Obligation | LLC | Corporation |
|---|---|---|
ACC annual report | Not required | Required: $45 (for-profit) / $10 (nonprofit) |
Franchise tax | None | None |
Entity-level state income tax | None (pass-through by default) | 4.9% of Arizona taxable income |
Owner-level state income tax | 2.5% flat on distributive share | 2.5% flat on dividends/wages received |
TPT (if selling taxable goods/services) | Applies | Applies |
County business personal property tax | Applies above $500,000 exemption | Applies above $500,000 exemption |
2026 ACC dormancy check | Applies if no filings in 2 years | Not applicable (annual report already required) |
Why this matters for real estate investors and high earners
If you hold Arizona rental property through a single-member LLC, the "no franchise tax, no annual report" reality is one of the reasons Arizona LLCs are popular for that purpose. But it can create a false sense that the LLC is entirely maintenance-free. It isn't. You still owe TPT if you're renting short-term (under 30 days counts as transient lodging), you still owe personal property tax on any equipment tied to the property above the exemption, and starting this year, a truly dormant holding LLC could get flagged under the new attestation policy if you've let it sit untouched.
For high earners running a business through an S-corp election to manage self-employment tax exposure, the corporate income tax question is different again: an S-corp doesn't pay Arizona's 4.9% corporate rate, since income passes through to your personal return at the flat 2.5% rate instead. Choosing the right structure, and understanding exactly which of these obligations actually apply to it, is a bigger factor in your total tax bill than any of the small ACC filing fees discussed here. That's a conversation worth having with an advisor rather than assuming based on what a competitor's LLC or corporation happens to pay, since entity structure and tax treatment genuinely differ from one business to the next. K&R's CPAs and Enrolled Agents work through this exact question with clients across every entity type, all 50 states.
Moving forward with confidence
Arizona's lack of a franchise tax is a real advantage, but it isn't the whole story. LLCs owe the ACC nothing annually, corporations owe a modest $45 or $10 report, and every active business, regardless of entity type, still deals with corporate or individual income tax, TPT, payroll tax, and property tax depending on what it actually does. Knowing which of these apply to your specific business, and which don't, is what keeps you from either missing a real obligation or panicking over one that was never yours to begin with.
Talk to K&R about your business's actual tax picture so you know exactly what you owe this year, not just what you don't. Book a consultation and we'll walk through your entity structure together.
Frequently asked questions
Does Arizona have a corporate franchise tax? No. Arizona has no franchise tax and no general gross receipts tax on businesses. Corporations do file an annual report with the Arizona Corporation Commission ($45 for-profit, $10 nonprofit), but that's an administrative filing fee, not a franchise tax calculated on income or capital.
Do LLCs have to pay an annual fee in Arizona? No. Arizona LLCs are not required to file an annual report or pay an annual fee to the Arizona Corporation Commission. This is true for both domestic and foreign LLCs registered in the state.
What is Arizona's corporate income tax rate? C-corporations pay 4.9% of their Arizona taxable income, with a $50 minimum tax. This applies to corporations, not to LLCs or S-corps taxed as pass-through entities.
What taxes does an Arizona small business actually pay? Depending on structure and activity: corporate income tax (C-corps only) or the 2.5% individual flat rate on pass-through income, Transaction Privilege Tax if selling taxable goods or services, payroll taxes if you have employees, and county personal property tax on business equipment above the $500,000 exemption.
What is the new LLC "Attestation of Existence" in Arizona? It's a 2026 Arizona Corporation Commission policy targeting LLCs with no filings in the past two years. The ACC sends an electronic notice asking the entity to confirm it's still active. No response within 60 days starts a path toward administrative dissolution. It isn't a fee or a tax, just a dormancy check.
Is there a minimum tax for Arizona corporations? Yes, for C-corporations subject to Arizona corporate income tax, there's a $50 minimum tax regardless of how the 4.9% calculation comes out. LLCs and S-corps don't pay this since they aren't subject to the corporate income tax in the first place.
