California LLC Business Tax Requirements
California LLCs owe an $800 annual franchise tax, a gross receipts fee if income exceeds $250,000, and must file Form 568 by April 15. Here's what you need to know about rates, deadlines, and how your LLC is taxed.
Bizee Editorial Staff
Editorial Team
California LLC tax snapshot
Filing fee: $70 (Articles of Organization, California Secretary of State)
Processing time: Varies; standard processing typically 5–10 business days
State agency: California Franchise Tax Board (FTB) for income and franchise taxes; California Department of Tax and Fee Administration (CDTFA) for sales and use tax
Annual report due: Statement of Information due within 90 days of formation, then every 2 years by the last day of the anniversary month
State tax rate: $800 annual franchise tax (all LLCs); LLC fee of $900–$11,790 if total California income exceeds $250,000; personal income tax rates of 1%–13.3% on pass-through income
How California taxes your LLC
California LLCs face 3 main state-level tax obligations: the $800 annual franchise tax, a gross receipts-based LLC fee if total California income exceeds $250,000, and personal income tax on any profits that pass through to the owner. The Franchise Tax Board (FTB) administers franchise and income taxes. The California Department of Tax and Fee Administration (CDTFA) handles sales and use tax.
California has a few requirements that catch people off guard — particularly the $800 franchise tax, which is due even if your LLC had no income and even in the first year of operation.
Unlike C Corporations, LLCs don't pay tax at the entity level on profits. Instead, income passes through to the owner's personal return. But California still layers on the franchise tax and the gross receipts fee on top of that pass-through structure, which makes the state's total tax burden higher than most.
The $800 annual franchise tax
Every California LLC owes an $800 annual franchise tax to the Franchise Tax Board, regardless of income, activity level, or whether the business turned a profit. For calendar-year LLCs, the tax is due by April 15 — the 15th day of the 4th month after the start of the taxable year. In the first year, it's due by the 15th day of the 4th month after the LLC's formation date.
The $800 is not optional and it's not waived for new businesses. If your LLC is formed in California or does business here, the fee applies. Pay it using FTB Form 3522 (LLC Tax Voucher).
One thing worth knowing: if you form your LLC late in the year and it has a short first taxable year, you may still owe the full $800. A tax professional can help you figure out whether any exemption applies to your specific situation.
The LLC fee based on gross receipts
On top of the $800 franchise tax, California charges an additional LLC fee based on total income from California sources. This fee kicks in once your LLC's total California income reaches $250,000. It's separate from income tax and is calculated on gross receipts, not net profit.
- Under $250,000 in total California income: $0 LLC fee
- $250,000 to under $500,000: $900
- $500,000 to under $1,000,000: $2,500
- $1,000,000 to under $5,000,000: $6,000
- $5,000,000 or more: $11,790
The LLC fee is reported and paid with Form 568. It applies to all California LLCs — including single-member LLCs and those classified as disregarded entities — if total California-sourced income clears the $250,000 threshold.
Form 568 filing requirements
California LLCs taxed as partnerships or disregarded entities file Form 568 (Limited Liability Company Return of Income) with the FTB each year. The deadline for calendar-year filers is April 15. Form 568 must be filed whether or not the LLC had income or was active during the year.
Form 568 is where you report total California income, calculate the LLC fee if applicable, and reconcile the $800 franchise tax. If your LLC has multiple members, each member's share of income, deductions, and credits is reported on Schedule K-1 (568) and flows to their individual California returns.
Single-member LLCs owned by an individual are generally treated as disregarded entities for California tax purposes. The owner reports business income on their personal California return, but the LLC still owes the $800 franchise tax and must file Form 568 if the LLC fee applies.
Federal taxes for California LLCs
California LLCs also have federal tax obligations. How your LLC is taxed at the federal level depends on how many members it has and whether you've made an election to change the default classification.
Single-member LLC
By default, the IRS treats a single-member LLC as a disregarded entity. You report business income and expenses on Schedule C of your personal federal return (Form 1040). You'll also owe self-employment tax — 15.3% on net earnings up to the Social Security wage base — because LLC profits aren't subject to payroll withholding.
Multi-member LLC
A multi-member LLC is taxed as a partnership by default. The LLC files Form 1065 with the IRS and issues Schedule K-1 to each member showing their share of income, losses, and deductions. Each member then reports that share on their personal return and pays self-employment tax on their portion of net earnings.
S Corporation election
Your LLC can elect to be taxed as an S Corporation by filing IRS Form 2553. Under an S Corp election, you pay yourself a reasonable salary as a W-2 employee and take additional profits as distributions, which aren't subject to self-employment tax. This can reduce your total tax bill once the business is earning enough to make the structure worthwhile. A tax professional can help you figure out whether the election makes sense for your income level.
Sales and use tax
If your LLC sells taxable goods or certain services in California, you'll need to register with the California Department of Tax and Fee Administration (CDTFA) and collect sales tax from customers. California's statewide base sales tax rate is 7.25%, but local district taxes can push the combined rate higher depending on where your business operates.
How often you file and remit sales tax depends on your sales volume. The CDTFA assigns a filing frequency — monthly, quarterly, or annually — when you register. If your LLC doesn't sell taxable products or services, sales tax registration isn't required.
FAQ
Yes. The $800 annual franchise tax is due in the first year of operation. For a new LLC, it's due by the 15th day of the 4th month after the LLC's formation date. There is no first-year exemption for the franchise tax — it applies regardless of income or activity level.
Most California LLCs file Form 568 (Limited Liability Company Return of Income) with the Franchise Tax Board by April 15 each year. You also pay the $800 franchise tax using Form 3522. If your LLC had no income and no LLC fee applies, you still need to file Form 568. A tax professional can help you figure out whether any additional state or federal forms apply to your situation.
Yes. California LLCs must file Form 568 even if the LLC had no income or was inactive during the year. The $800 annual franchise tax is also still owed. Not filing can result in penalties and put your LLC out of good standing with the state.
For calendar-year LLCs, the $800 franchise tax and Form 568 are both due by April 15 — the 15th day of the 4th month after the close of the taxable year. In the first year, the $800 franchise tax is due by the 15th day of the 4th month after the LLC's formation date. If your LLC uses a fiscal year instead of a calendar year, the deadlines shift accordingly.
It depends on your income. Every California LLC owes at least $800 per year in franchise tax. If your total California income exceeds $250,000, you also owe an LLC fee ranging from $900 to $11,790 depending on your gross receipts tier. On top of that, LLC profits pass through to the owner's personal return and are taxed at California's personal income tax rates of 1%–13.3%.
"ACH Franchise Tax BD" is an electronic payment debit from the California Franchise Tax Board. It appears when the FTB pulls a tax payment directly from your bank account — most often for the $800 annual franchise tax or an estimated tax payment. If you see this charge and didn't authorize a payment, contact the FTB directly to check your account.
Generally, no broad exemption exists. The $800 annual franchise tax applies to all LLCs registered or doing business in California, including those with no income. A limited exemption may apply to LLCs in their first taxable year if the year is short enough under specific FTB rules, but this is narrow. Talk to a tax professional to find out whether your LLC qualifies for any relief.
It depends on how your LLC is classified. In a single-member LLC, you're taxed as a sole proprietor by default — business income flows to your personal return on Schedule C and you pay self-employment tax on net earnings. In a multi-member LLC, you're taxed as a partnership and each member reports their share of income on their personal return. If your LLC elected S Corporation status, you pay yourself a salary and take additional profits as distributions.
