What the California LLC Franchise Tax Actually Is
Every California LLC owes the Franchise Tax Board (FTB) a minimum annual franchise tax of $800. This obligation exists regardless of revenue, profitability, or business activity. A California LLC that files articles of organization and never opens a bank account still owes $800 the first year it is registered.
The franchise tax is California's price of access to its market and legal protections. Unlike most states' modest annual report fees, California treats LLC status as a privilege that carries an automatic annual cost. This makes California one of the most expensive states for small LLCs to maintain compared to Wyoming ($60), Florida ($138.75), or Texas (no franchise tax under the $1.23M no-tax-due threshold).
Who owes the $800 minimum
Three categories of entities pay California's $800 minimum franchise tax: (1) LLCs formed in California, (2) LLCs formed in other states that register to do business in California through foreign qualification, and (3) LLCs treated as corporations for federal tax purposes (which technically pay the corporation franchise tax under a parallel structure). Single-member LLCs pay the same $800 minimum as multi-member LLCs.
The first-year exemption for LLCs formed after January 1, 2021
California eliminated the first-year $800 franchise tax for LLCs and corporations formed between January 1, 2021 and December 31, 2023. This exemption was a temporary measure to encourage business formation during and after the pandemic. For LLCs formed in 2024 and later, the $800 franchise tax applies in the first year of formation, with payment due by the 15th day of the fourth month after formation.
The April 15 Deadline and How Payment Works
California LLC Fee Schedule (in addition to $800 minimum)
| California-source income | LLC fee | Total (fee + $800 min) |
|---|---|---|
| $0, $249,999 | $0 | $800 |
| $250,000, $499,999 | $900 | $1,700 |
| $500,000, $999,999 | $2,500 | $3,300 |
| $1,000,000, $4,999,999 | $6,000 | $6,800 |
| $5,000,000+ | $11,790 | $12,590 |
For continuing LLCs (those past their first year), the $800 annual franchise tax is due by April 15 of each year. The payment is made through the FTB online portal at the state filing system, using Form 3522 (the LLC Tax Voucher). Most LLCs file electronically because California's portal provides instant confirmation of payment.
What you file
Form 3522 is a one-page voucher that includes: the LLC's legal name, the California Secretary of State entity number, the LLC's federal EIN, the taxable year, and the $800 payment. Form 3522 is technically a payment voucher only; the actual annual income tax return (Form 568) is filed separately, due the 15th day of the 4th month after the close of the LLC's taxable year (April 15 for calendar-year LLCs).
The penalty structure
Missing the April 15 franchise tax payment triggers a penalty of 5% of the unpaid tax per month, up to a maximum of 25%, plus interest accruing at the FTB's underpayment rate (currently around 9% annualized in 2026). An $800 payment that goes 6 months unpaid becomes approximately $1,036 with penalty and interest. Repeated non-payment results in FTB suspending the LLC's right to do business in California.
The LLC Fee for Revenue Above $250,000
Pre-filing Checklist
- Confirm current officer/manager information matches state records
- Verify registered agent address matches the agent's current record
- Check filing fee amount against the state's current fee schedule
- Confirm prior-year obligations are clear (no outstanding reports)
- Verify entity status is active (not administratively dissolved)
- Set a calendar reminder for next year's deadline
In addition to the $800 minimum franchise tax, California charges an LLC fee for entities with total California-source income above $250,000. This fee operates as a gross-receipts tax and stacks on top of the $800 minimum.
The fee schedule for 2026
The LLC fee bracket structure for taxable income from California sources: $0 - $249,999: no fee. $250,000 - $499,999: $900 fee. $500,000 - $999,999: $2,500 fee. $1,000,000 - $4,999,999: $6,000 fee. $5,000,000 and above: $11,790 fee. These amounts are flat fees within each bracket, not marginal rates. An LLC with $250,001 in California-source income owes $900 in fees plus the $800 franchise tax, for a total of $1,700.
The estimated fee payment
LLCs that expect to owe the LLC fee must make an estimated fee payment by the 15th day of the 6th month of the taxable year (June 15 for calendar-year LLCs). Underpayment of the estimated fee triggers a 10% penalty on the underpayment amount. This means LLCs that grow quickly within a single year often need to project their California-source income mid-year and submit an estimated payment to avoid the underpayment penalty.
Common California LLC Filing Mistakes
California's combination of $800 minimum tax, LLC fee, and Form 568 requirements creates multiple opportunities for errors. The most expensive mistakes share a common pattern: assuming that California works like other states.
Mistake 1: Treating the $800 as a one-time fee
New California LLC owners often interpret the $800 as a formation fee rather than an annual recurring tax. The first year's payment is followed by another payment every April 15 indefinitely until the LLC is formally dissolved. Plan for this as an annual line item, not a one-time cost.
Mistake 2: Forgetting to file Form 568
Form 3522 (the $800 voucher) is separate from Form 568 (the LLC return). Many LLCs pay the $800 on time but miss the Form 568 filing requirement. Form 568 includes the LLC fee calculation, member information, and a reconciliation of partnership income. Missing Form 568 triggers a separate penalty of $18 per member per month, with a maximum of 12 months.
Mistake 3: Foreign LLCs that miss California registration
Out-of-state LLCs that conduct business in California must register as foreign LLCs and begin paying the $800 minimum tax from the date business activity in California began. The FTB has retroactively assessed back-tax obligations on out-of-state LLCs that operated in California for years without registering. The standard for "doing business" in California is broad: having an employee in California, owning California property, or generating sales above thresholds all trigger registration.
How to Plan for the Annual $800 (and the LLC Fee if Applicable)
For a California LLC, the $800 minimum tax is a non-negotiable annual cost. Three planning practices help avoid penalties and reduce surprise:
Practice 1: Set the April 15 deadline as a recurring calendar event
Schedule the $800 franchise tax payment 4-6 weeks before April 15 every year. Treat it as a fixed business expense, not a tax-time decision. Pair the payment date with a Form 568 preparation date so both obligations are handled in one workflow.
Practice 2: Track California-source income quarterly if growing
If your LLC is approaching $250,000 in California revenue, run a quarterly check on year-to-date California-source income. By mid-year (June 15) you should have a defensible projection. This avoids the 10% underpayment penalty on the LLC fee and provides early warning of cash-flow timing for the upcoming tax obligation.
Practice 3: Document the dissolution decision early
If you decide to close a California LLC, dissolution must be filed with the Secretary of State and the FTB must be notified. Until dissolution is complete, the $800 annual tax continues to accrue every year. Many founders learn this when filing personal tax returns and discovering that a "closed" LLC owes three years of back franchise tax plus penalties.
How File.Business Handles California LLC Compliance
File.Business manages California LLC compliance end-to-end: annual Form 3522 franchise tax payment by April 15, Form 568 preparation and filing, LLC fee calculation and estimated payment by June 15 for high-revenue LLCs, and Statement of Information filings every 24 months. For LLCs being closed, we handle the FTB dissolution clearance and Secretary of State filing in a single workflow.
Frequently asked questions
When is the California $800 franchise tax due?
April 15 of each year for continuing LLCs. For LLCs in their first year (formed 2024 and later), payment is due by the 15th day of the fourth month after formation. The 2021-2023 first-year exemption has expired.
Do I have to pay the $800 if my California LLC has no revenue?
Yes. The $800 minimum applies regardless of revenue or business activity. A California LLC with zero revenue still owes the $800 every year until the LLC is formally dissolved with the Secretary of State and the FTB.
What is the California LLC fee?
An additional fee on top of the $800 minimum tax for LLCs with California-source income above $250,000. The brackets: $250K-$500K is $900, $500K-$1M is $2,500, $1M-$5M is $6,000, and $5M+ is $11,790. The fee is flat within each bracket.
When is the California LLC fee estimated payment due?
June 15 of the taxable year. If the actual fee exceeds 90% of the estimated payment, a 10% underpayment penalty applies. LLCs growing toward the $250,000 threshold should project income mid-year.
What is Form 568 in California?
The California LLC return, separate from Form 3522 (the $800 tax voucher). Form 568 includes the LLC fee calculation, member information, and partnership-style reconciliation. It is due the 15th day of the 4th month after the close of the LLC's taxable year. Missing it triggers a separate penalty of $18 per member per month.
Do out-of-state LLCs doing business in California owe the $800?
Yes. Out-of-state LLCs must register as foreign LLCs in California and pay the $800 minimum starting when business activity in California began. The Franchise Tax Board has retroactively assessed back-tax obligations on out-of-state LLCs that operated in California for years without registering.
How do I close a California LLC to stop the $800?
File a Certificate of Cancellation (Form LLC-4/7) with the California Secretary of State, file final Form 568 with the FTB, and ensure all back taxes are paid. Until dissolution is complete, the $800 continues to accrue every year.
Can I deduct the $800 California franchise tax?
The $800 is generally deductible as a state and local tax on federal income tax returns, subject to the SALT cap rules. For pass-through entities, the $800 typically flows to members as a deduction. Confirm specific treatment with a tax advisor based on your entity type and state PTE election status.
Let File.Business handle the filing.
We pull your record from the state, prefill every field, and validate before submission. Same-day filing in most states. First year of registered agent included with new entity formations.
