If you own a California LLC, the state taxes the entity itself, not just your share of the profit. Every California LLC owes an $800 annual minimum franchise tax, and once the business grows, a separate gross-receipts fee on top of it. This is true even for a single-member LLC that the IRS treats as a disregarded entity. California, like Texas, does not give pass-through entities a free pass at the state level.
Which California LLCs owe the $800 franchise tax?
Every LLC that is organized, registered, or doing business in California owes the $800 annual minimum tax under Revenue and Taxation Code Section 17941. There is no profit threshold and no exemption for small or inactive entities. The $800 is due whether the LLC earned nothing, lost money, or never opened a bank account.
That includes:
- Multi-member LLCs taxed as partnerships
- Single-member LLCs that are disregarded entities for federal purposes
- LLCs formed in another state but registered or doing business in California
- LLCs taxed as S-corporations or C-corporations (they owe the tax under the corporate rules instead, but the $800 minimum still applies)
"Doing business" is broad. It reaches an out-of-state LLC that is a member of a California LLC, that holds California real estate, or that has sales, property, or payroll in the state above the annual economic-nexus thresholds. If you formed a Delaware or Wyoming LLC but run it from California, the state still expects the $800.
Do new California LLCs still get the first-year $800 exemption?
No. Assembly Bill 85 waived the first-year $800 tax only for LLCs, limited partnerships, and limited liability partnerships formed in 2021, 2022, and 2023. That relief expired. An LLC formed in 2024 or later owes the full $800 for its first taxable year.
You pay the $800 with Form 3522 (LLC Tax Voucher), due the 15th day of the 4th month of the taxable year (April 15 for a calendar-year LLC). The tax is prepaid during the year it applies, so a new LLC often owes an $800 payment within a few months of forming. Miss the deadline and California adds a penalty plus interest.
What is the California LLC gross-receipts fee?
Once an LLC's total California income reaches $250,000, it owes a second charge on top of the $800: the LLC fee under Revenue and Taxation Code Section 17942. This fee is tiered on total income (gross receipts attributable to California), not on net profit, so an LLC with thin margins can owe a meaningful fee even in a break-even year.
| Total California income | LLC fee |
|---|---|
| Under $250,000 | $0 |
| $250,000 to $499,999 | $900 |
| $500,000 to $999,999 | $2,500 |
| $1,000,000 to $4,999,999 | $6,000 |
| $5,000,000 or more | $11,790 |
You estimate and prepay the fee with Form 3536 (Estimated Fee for LLCs), due the 15th day of the 6th month of the taxable year (June 15 for a calendar-year LLC). Underpaying the estimate triggers a 10 percent penalty on the shortfall, so a growing LLC should re-estimate mid-year rather than wait for the return.
A profitable year is not required
CautionThe fee is based on total California income, meaning gross receipts sourced to California, before expenses. An LLC that grosses $600,000 and nets $20,000 still owes the $2,500 fee plus the $800 tax, for $3,300 of entity-level cost before a dollar of owner income tax.
How does a single-member LLC file in California?
A single-member LLC is disregarded for income tax, so its profit flows to the owner's return (a Schedule C for an individual, or the parent entity's return). But the LLC is not invisible to California. It still owes the $800 tax, still owes the gross-receipts fee if it crosses $250,000, and still files its own Form 568 (LLC Return of Income) to report the activity and reconcile the payments.
Form 568 is filed annually. For a multi-member LLC taxed as a partnership, the return is due the 15th day of the 3rd month after the close of the tax year. For a single-member LLC, it is due the 15th day of the 4th month, matching the owner's individual return. The $800 and the fee are reported and trued up on Form 568 regardless.
Should you elect S-corp status to lower California tax?
An S-corp election can reduce self-employment tax, but it does not escape California's entity-level charge. A California S-corporation pays a 1.5 percent tax on its net income (filed on Form 100S), with the same $800 annual minimum. So an S-corp trades the LLC gross-receipts fee for a 1.5 percent net-income tax, and still owes at least $800.
Run the LLC-fee vs S-corp-tax comparison
Compare the LLC gross-receipts fee (based on total income) against the S-corp 1.5 percent tax (based on net income) plus reasonable-salary payroll costs. A high-revenue, low-margin business often pays less under the S-corp's net-income tax, while a high-margin service business may not save enough to justify the payroll and compliance overhead. Model both before electing.
Do not run a California business through an out-of-state LLC to dodge the $800
If you manage the business from California, the state treats it as doing business in California and expects the $800 tax and Form 568 anyway, now across two states' filings. The out-of-state entity usually adds cost without removing the California obligation.
Before your California LLC files
- Pay the $800 with Form 3522 by the 15th day of the 4th month, every year the LLC exists
- Estimate the gross-receipts fee with Form 3536 by the 15th day of the 6th month if you expect $250,000 or more in California income
- File Form 568 to reconcile the tax and fee
- Compare the LLC fee against an S-corp election if you are clearing $250,000 or more
California and Texas both tax the entity regardless of federal pass-through status, but the mechanics differ. If you also operate in Texas, compare the rules in our Texas franchise tax guide. For a broader view of doing business in the state, see our California tax hub.
Have questions about your California LLC's franchise tax or Form 568? Contact TS CPA for a free consultation. We respond within the same day.