Say you’re a newly registered small business feeling your way around your market or industry. You’re learning on your feet, determined to make it work. You’ve provided tremendous services to the community and your work has impacted society in a major way, work that you’ve done to, yes, solve problems, but to equally establish rapport and build your brand.
During the initial or first few tax seasons that your company (let’s say an LLC consulting firm) has existed it earns little to no revenues. So you’re in a bit of a bind.
To top that you receive a notice from the Secretary of State’s office informing you that filing your annual report will cost you more than $300.00. You also receive a notice from the Department of Revenue of the state where you formed your business stating your requirement to file a Franchise and Excise Tax return (a “Minimum Pay Inactive Annual Return”) along with a $100.00 filing fee. Both of these fees are unreasonable, of course, considering that this company has not earned revenues, and has operated at a fault, all awhile having such a societal impact that the effects of services provided by the company, for free, mind you, have made national and international headlines, and the company executive/owner has even earned a national award for their relentless, though unpaid efforts. And never mind the more than $700.00 that the business founder/owner/executive paid Legal Zoom to properly draft and file documentation (including Articles of Organization) to form the business.
Companies not yet earning revenues should not be required to pay taxes or fees for filing annual reports or Franchise and Excise Tax returns, etc. There should be no flat fees, only those that are based upon a company’s actual income, if any. The typically substantial registration fees for forming a company should suffice until the company starts earning revenues. If anything, newly formed businesses that are experiencing challenges should receive encouragement and pointers from especially local business authorities on methods of thriving within their particular niches. When any business succeeds the states are fortified, and waiving taxes and fees that further strain newly developing businesses that are not yet earning revenues would help those companies to become viable; and the states, of course, would reap their share of taxes from the earned revenues and profits of those companies once this occurs.