Does California Have a Franchise Tax for LLCs?
Yes. California imposes an $800 annual franchise tax on all LLCs under Cal. Rev. & Tax. Code § 17941, effective immediately upon formation with no first-year exemption. LLCs with California-source gross receipts exceeding $250,000 owe additional tiered fees under § 17942, ranging from $900 to $11,790 depending on income level.
The $800 Base Franchise Tax
Every California LLC owes $800 annually, regardless of profitability or business activity. This applies to single-member LLCs, multi-member LLCs, inactive entities, and foreign LLCs doing business in California. The tax is due April 15 each year and is mandatory—there is no exemption for newly formed or dormant LLCs. The first-year exemption expired December 31, 2023.
Gross Receipts Fees
LLCs exceeding $250,000 in California-source gross receipts owe additional fees:
| Gross Receipts | Fee |
| $250,001–$500,000 | $900 |
|---|---|
| $500,001–$1,000,000 | $2,500 |
| $1,000,001–$5,000,000 | $6,000 |
| $5,000,001+ | $11,790 |
These fees are calculated on total California-source income and are due with your franchise tax return.
Income Tax vs. Franchise Tax
Do not confuse the franchise tax with California income tax. LLCs also owe:
- State income tax (1%–13.3% graduated rate) on net business income, passed through to members under Cal. Rev. & Tax. Code §§ 17001–17039.6
- Self-employment tax on member distributions
- Sales tax (7.25% state + local) if selling taxable goods or services
The $800 franchise tax is separate, mandatory, and applies regardless of whether your LLC is profitable.
Filing and Penalties
File your franchise tax return with the California Franchise Tax Board (FTB) by April 15 each year. Visit ftb.ca.gov for forms and payment options. Failure to pay results in penalties, interest, and potential suspension or forfeiture of your LLC by the Secretary of State. Reinstatement requires filing delinquent reports, paying penalties, and requesting revival.
Action Items
- Budget $800 minimum into first-year operating costs
- Register with the California Franchise Tax Board
- Track gross receipts to determine tiered fee obligations
- Mark April 15 annually for payment deadlines
- Consult a California tax professional if receipts exceed $250,000
This is general information, not legal advice. Consult a California tax professional or attorney for your specific situation.