In 2022, Carta’s business license was revoked in Illinois for failing to pay franchise tax, a tax on national corporations doing business in the

Startups are getting fined, or sometimes banned, by individual states

submited by

Style Pass

2024-09-08 00:00:10

In 2022, Carta’s business license was revoked in Illinois for failing to pay franchise tax, a tax on national corporations doing business in the state, according to state records seen by TechCrunch. In 2024, Washington state terminated cap table software Pulley’s business license, according to state filings.

Carta spokesperson Amanda Taggart told TechCrunch that the company just missed the proper timeline to file its yearly report and pay the corresponding tax. Taggart added that the company has remedied the situation and is waiting on Illinois to return it to good standing. Yin Wu, the founder and CEO of Pulley, said that the company has filed the outstanding returns and is in the process of getting its license reinstated.

Startups like Carta and Pulley are definitely not alone in running afoul of state business rules. Plus, while these companies both had registered in these states as required and ran into issues later, many startups don’t begin the registration process in each state when they should at all.

When startups have employees in a state, conduct an acquisition or sign up customers there, they typically need to register in the state and maintain themselves in good standing. That includes paying their state taxes and fees on an ongoing basis, Andrea Schulz, a lawyer at Grant Thorton, told TechCrunch. If they don’t, they risk being fined by the state, or other consequences.