California charges $800/year minimum franchise tax to ALL LLCs - even with $0 revenue. First year waived for new LLCs formed after January 1, but due by April 15 of second year regardless of profit.
The $800 Franchise Tax
Every California LLC pays minimum $800/year franchise tax. No exceptions for small businesses, startups, or unprofitable companies. Due by 15th day of 4th month after LLC formed.
First year exemption: LLCs formed in current tax year don't pay $800 until next year. Form LLC on January 2, 2025 - first $800 due April 15, 2026. Form LLC on December 31, 2024 - first $800 due April 15, 2025.
Additional Tax Above $250K Revenue
If gross receipts >$250K, pay additional fee on top of $800 minimum. $250K-$499K: +$900 ($1,700 total). $500K-$999K: +$2,500 ($3,300 total). $1M-$4.9M: +$6,000 ($6,800 total).
$5M+: +$11,790 ($12,590 total). Based on California-sourced revenue only - not total revenue if multi-state operations.
Out-of-state LLC trap: Foreign LLCs doing business in California pay same $800 minimum. Wyoming/Delaware LLC + California office = $800 CA tax PLUS Wyoming/Delaware fees. No tax savings.
Name Availability
Check California Secretary of State database before filing. Name must be "distinguishable" from existing California entities.
Use California business entity search. Free, instant results. Reserve name for $10 (holds 60 days) if not ready to file.
Distinguishability is subjective: "Tech Solutions LLC" vs "TechSolutions LLC" likely rejected as too similar. Add unique word to differentiate.
Naming Rules
Must end with "Limited Liability Company" or "LLC" (abbreviation allowed). Cannot use "bank", "trust", "insurance" without authorization from regulators.
Cannot imply government affiliation: "California", "State", "Federal" require approval. Professional services (law, medicine, accounting) have separate rules - consult licensing board.
Formation Process
File Articles of Organization: $70 via California SOS BizFile, 5-7 business days processing. Expedited: $350 for same-day, $500 for 4-hour, $750 for 1-hour rush.
File Statement of Information: Due within 90 days of formation, $20 fee. Must update every 2 years. Appoint registered agent: $0 if using yourself at CA address, $100-300/year for service.
Obtain EIN from IRS: Free, instant online. File with Franchise Tax Board: Receive tax booklet 60-90 days after formation.
Costs Breakdown
Articles of Organization: $70 state filing. Statement of Information: $20 (initial + $20 every 2 years). Franchise tax: $0 first year, $800/year starting year 2.
Registered agent: $0-300/year. Name reservation (optional): $10 for 60 days. Expedited processing (optional): $350-750 if urgent.
Total first year: $90-400 (no franchise tax first year). Ongoing years: $800-3,300/year depending on revenue (franchise tax + statement of information).
Operating Agreement
Not required to file with state but HIGHLY recommended. Prevents member disputes, clarifies ownership splits, defines management structure, protects limited liability status.
Cost: $0 (DIY template) to $1,500 (lawyer-drafted for complex ownership). Courts can pierce corporate veil if no Operating Agreement exists during disputes.
California doesn't require filing Operating Agreement - keep it private. Update whenever ownership or management changes to avoid costly disputes.
Statement of Information
Due within 90 days of LLC formation, then every 2 years by anniversary. $20 filing fee each time. Lists: LLC address, registered agent, manager/member names.
Public record - anyone can look up your LLC members/managers. Missing deadline: $250 penalty PLUS company suspension after 60 days. Suspended LLC loses liability protection.
Suspension Consequences
Can't defend lawsuits in California courts. Can't enforce contracts. Lose limited liability - personal assets at risk. $250 penalty to reinstate PLUS back fees and penalties.
Foreign Qualification
If your LLC is formed in another state but doing business in California, must register as foreign LLC. Same $800 franchise tax applies - no savings from out-of-state formation.
Foreign qualification: $70 filing fee. Statement of Information: $20 within 90 days, then every 2 years. Result: Pay Wyoming/Delaware fees PLUS California $800 = worse than forming in California.
When Required
Physical office or warehouse in CA: Required. Employees working in CA: Required. Selling to CA customers online: Generally not required unless inventory stored in CA.
Threshold: Regular, continuous business activity in California triggers requirement. One-time project or trade show attendance doesn't trigger.
Don't try to avoid CA tax with out-of-state LLC: FTB audits foreign LLCs. If they determine you're doing business in CA, you owe back franchise tax + 25% penalty + interest. Average penalty: $3,000-8,000.
Franchise Tax Payment
Pay via FTB website annually. Due April 15 each year (15th day of 4th month of tax year). Payment methods: Credit card (+2.3% fee), debit card (+$1.50), e-check (free).
Late payment penalty: 5% per month up to 25% maximum. $800 tax becomes $1,000 after 5 months late. Interest: ~3-5% annually compounded daily.
First Year Timing
Form LLC January-December 2025: First $800 due April 15, 2026 (waived for first year). Form LLC December 2024: First $800 due April 15, 2025 (no waiver - different tax year).
Strategy: If forming near year-end, wait until January 1 to get full first-year exemption. Forming December 31 means $800 due 3.5 months later.
Series LLC Not Recognized
California doesn't recognize series LLC structure. If you form Delaware Series LLC and do business in CA, each series treated as separate LLC = $800 x number of series.
Example: Delaware Series LLC with 5 series doing business in CA = $4,000/year California franchise tax. Better to form separate CA LLCs or single-member LLCs.
Common Mistakes
Forming out-of-state LLC to avoid $800 tax: Doesn't work - foreign qualification triggers same tax. Missing Statement of Information: $250 penalty + suspension after 60 days.
Not budgeting $800 annual tax: Unprofitable startups surprised by tax bill. Paying franchise tax late: 5% monthly penalty quickly doubles amount owed.
Using series LLC in California: Each series taxed separately at $800 - multiplies annual cost. Assuming first-year exemption applies if formed in December: Different tax year means no exemption.
Post-Formation Compliance
Franchise tax: $800 annually due April 15 (first year waived). Statement of Information: Every 2 years, $20 fee, due by LLC anniversary.
Federal tax filing: Single-member files Schedule C, multi-member files Form 1065. State tax return: Form 568 annually even if no income (required to maintain good standing).
Gross receipts fee: If >$250K CA revenue, pay additional fee with annual return. Maintain separate bank account: Commingling funds pierces liability protection.
Trademark Lens verifies business name availability before $90-400 California LLC formation and $800/year ongoing franchise tax costs.