California LLC Franchise Tax: The $800 Minimum

What to take away

The $800 minimum franchise tax and who owes it in Los Angeles

The $800 minimum franchise tax is the floor, not the whole bill. Most LLCs doing business in California or registered there owe it for each taxable year, subject to limited exceptions, according to the FTB's LLC filing rules. An LLC formed in another state that registers to do business in California generally owes it too.

Location inside Los Angeles changes almost nothing here. A single-member LLC in Koreatown and a five-member LLC in Woodland Hills pay the same $800 base. The tax is a state charge, collected by the Franchise Tax Board, so the city and county do not set the amount.

What does vary is how the LLC is taxed. A single-member LLC is disregarded for federal purposes and files California Form 568 as a disregarded entity. A multi-member LLC is usually a partnership and files Form 568 as well. Either way, the $800 is due.

An LLC classified as a corporation, whether by election or default, pays the $800 corporate minimum franchise tax instead. That is still $800, but the return changes to Form 100 or Form 100S.

Limited exceptions may apply, but they are not automatic: an LLC must qualify under the applicable FTB rules. Most Los Angeles founders should assume the $800 applies unless a tax professional says otherwise.

That base amount is why the LLC formation decision deserves more thought in California than in states with no annual tax. A cheap filing service does not change the recurring bill.

When California adds an annual LLC fee

Above the base tax, California adds an annual LLC fee based on total income from all sources attributable to California. The fee starts once that figure exceeds $250,000. It is not a tax on profit; gross revenue drives it.

The annual LLC fee ranges from $900 to $11,790, based on total income attributable to California.

The estimated fee is due on Form 3536 by the 15th day of the 6th month of the tax year, which is June 15 for a calendar-year LLC, and any balance settles with the annual return. It is owed even if the business loses money. A downtown LA agency with $600,000 in billings owes $2,500 no matter what its margins look like.

Estimating the figure is the hard part for service businesses. The Franchise Tax Board counts income from all sources attributable to California, which can include work performed for out-of-state clients if the LLC is based in Los Angeles. Founders often undercount and get a notice.

The fee also applies to the LLC's first year if revenue crosses the threshold in that year. There is no proration for a short year. That catches LLCs that launch mid-year and land a large contract before December.

The FTB's filing information publication explains how the $800 minimum franchise tax and the annual fee interact. Form 3522, the Limited Liability Company Tax Voucher, is where the $800 tax is paid. The estimated LLC fee is paid separately on Form 3536, apart from the return.

California Secretary of State filing fees for an LA LLC

Before any tax is due, an LLC pays the California Secretary of State filing fee. Articles of Organization cost $70 to file online and $70 by mail. There is no city surcharge, so an LLC in Boyle Heights pays the same as one in Santa Monica.

A foreign LLC registering to do business in California pays a $70 Application to Register. It also needs a Certificate of Good Standing from its home state, which costs extra and takes time to obtain.

Online filing is faster, often same-day or next-day, and the state's portal accepts credit cards. Mailed filings take longer and need a check. Either way, the $70 is a one-time fee, not annual.

After formation, most Los Angeles businesses need a Los Angeles business tax registration, handled through the Office of Finance. The cost depends on the business category, and the city requires it before the business starts operating. A home-based LLC in the Valley is not automatically exempt.

New businesses in LA may qualify for the city's startup exemption, which can waive the registration fee. Eligibility and duration depend on the city's rules, so confirm them with the Office of Finance before counting on a waiver. The exemption applies to the city tax, not to the state's $800. Founders sometimes confuse the two and get an unpleasant letter.

To check what other registrations apply, the SBA's Department of Revenue lookup points to state tax registration pages. It is a starting point, not a substitute for checking the city's own rules.

Franchise Tax Board deadlines and first-year exemptions

The first $800 payment is due by the 15th day of the 4th month, counting the month of formation as the first. An LLC formed in January owes by April 15. One formed in October owes by January 15 of the following year.

After that, the pattern repeats annually. The $800 for each year is due on the 15th day of the 4th month of that year (April 15 for a calendar-year LLC), paid with Form 3522. The LLC files Form 568 by the 15th day of the 4th month after its tax year ends, and any balance of the annual fee is settled with it. Extensions move the return, not the payment.

Estimated fee payments for LLCs that expect to cross $250,000 are made with Form 3536 by June 15 for a calendar-year LLC, not by the April deadline that applies to the $800 tax. Underpaying triggers interest and a penalty, so check the FTB's current penalty rules.

A first-year exemption is not a general break for new businesses. Most operating California LLCs owe the $800 in their first year; limited exceptions depend on the LLC's specific tax status and circumstances. Check the FTB's current rules before assuming no payment is due.

Corporations have had their own temporary first-year rules in some past years. Those are corporate classification issues, not a general break for new LLCs, so check the FTB's current rules.

Missing payments has consequences beyond the bill. The FTB can assess penalties, and the Secretary of State can suspend the LLC, which blocks the business from enforcing contracts or defending lawsuits. If the LLC is already winding down, the dissolve an llc in california process still requires clearing the tax balance first.

For owners weighing how the entity is taxed, the LLC S Corp election deadline matters because the classification changes which return the LLC files and how California taxes it. The $800 minimum still applies, so confirm with the FTB or a tax professional how the annual LLC fee is treated after an election.

What an $800 tax bill looks like for a small Los Angeles LLC

Consider a two-member LLC in Highland Park that designs websites. It formed in March, collected $180,000 in its first year, and has no employees.

Here is the cash it should plan for:

Total state cost in year one lands near $870 plus the city registration. The same LLC with $700,000 in revenue would add a $2,500 annual fee, pushing its state bill past $3,300.

That gap explains why revenue forecasting matters more than the filing fee. A Los Angeles LLC that grows quickly can owe thousands in year two without any change in its legal structure.

Owners should also track the conditions that show the entity is being run properly, not just formed. The LLC formation metrics list is a useful check on whether the LLC is keeping the records the state and the IRS expect.

Set aside about $67 a month, which covers the $800 a year, from the start. It is the one California cost that never goes away while the LLC exists.

Common questions