What Does a California LLC Owe Each Year?

Forming an LLC is a common step for farms, trucking outfits, contractors and rental owners around Los Banos. It can make sense for liability and ownership reasons, but it also creates yearly costs and filings that apply whether or not the business made money. Here is what the Franchise Tax Board says an LLC owes, and the questions to ask a CPA before and after you form one.

The $800 annual tax

According to the Franchise Tax Board, every LLC that is doing business in California or is organized in California must pay an annual tax of $800. It is due even if the LLC does not conduct business, and it keeps coming due each year until the LLC is cancelled.

The first year’s tax is due by the 15th day of the 4th month after the LLC files with the Secretary of State. After that, it is due by the 15th day of the 4th month of each taxable year. It is paid with the LLC Tax Voucher, FTB 3522, or online. A first-year exemption existed only for tax years beginning in 2021 through 2023, so a new LLC today should plan to pay in its first year.

The LLC fee for larger businesses

On top of the annual tax, an LLC with total California income of $250,000 or more owes a fee based on that income. It must be estimated and paid by the 15th day of the 6th month of the current tax year, using FTB 3536.

Total California income	Fee
$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

The fee is based on total California income as the state defines it, a figure much closer to gross revenue than to profit. A farm or trucking business with thin margins can owe it in a year with no profit at all. Missing the estimated payment leads to penalties and interest.

Which returns does an LLC file?

• Form 568, the Limited Liability Company Return of Income, by the original due date, for LLCs classified as partnerships or disregarded entities;
• a Statement of Information with the Secretary of State to keep the LLC active; the Board collects a $250 Secretary of State penalty if it is not filed;
• the owners’ own federal and state returns, since LLC profit usually flows through to them.

The Board notes that an LLC must have the same tax classification for California as for federal purposes. A single-member LLC is usually disregarded, and its profit is taxed on the owner’s return, with self-employment tax as described in How Does Self-Employment Tax Work?.

Can I avoid the $800 if I stop using the LLC?

Only by cancelling it properly. The annual tax continues until the LLC is cancelled with both the Secretary of State and the Franchise Tax Board, including a final return. If you cancel within one year of organizing using the Secretary of State’s short-form cancellation, the Board says the LLC is not subject to the $800 tax for its first year. An LLC that simply goes quiet keeps owing.

Questions to ask a CPA before forming one

• Given my income, does an LLC change my taxes at all, or only my liability?
• Will my income reach the fee threshold, and how will we estimate it?
• Should the LLC be taxed as a disregarded entity, a partnership or a corporation?
• Who will file Form 568 and the Statement of Information, and is that in the engagement?
• Do I also need a seller’s permit? See Do I Need a Seller’s Permit in California?.

Does an LLC change my federal taxes?

Often less than people expect. For federal purposes a single-member LLC is usually disregarded, so its income is reported on the owner’s return just as if there were no LLC, and a multi-member LLC is usually taxed as a partnership. The main reasons owners form LLCs are liability and ownership arrangements, not tax savings. An LLC can elect to be taxed as a corporation, which changes the picture again, with its own costs and filings. These choices are worth a paid conversation with a CPA before you file anything with the Secretary of State.

Dates to put on the calendar

For a calendar-year LLC: the annual tax by April 15, the estimated fee by June 15 if it applies, Form 568 by the original due date, and the Statement of Information on the Secretary of State’s schedule. Add them to the state estimated tax dates in When Are California Estimated Tax Payments Due? so everything is in one place.