What does California's $800 minimum tax and LLC fee cost my business?

• LLCs pay an annual tax of $800 if they are doing business in California or organized or registered here. It is due every year until the LLC is cancelled, even if it does no business.
• S corporations and C corporations pay a minimum franchise tax of $800 if they are incorporated, registered or doing business in California. It is due with the first estimated payment, the 15th day of the 4th month of the tax year, April 15 for a calendar year (S corporations).
• Limited partnerships and limited liability partnerships pay an annual tax of $800 with their return.
• General partnerships and sole proprietors do not pay it.

A corporation newly incorporated or qualified on or after January 1, 2020 does not pay the minimum franchise tax for its first taxable year. Only the $800 minimum is waived: an S corporation still pays 1.5% (S corporations) and a C corporation 8.84% of any first-year income.

An LLC has no such break any more; the first-year exemption applied only to tax years beginning in 2021, 2022 and 2023. An LLC's first taxable year begins when it files with the Secretary of State, and its first $800 is due by the 15th day of the 4th month of that year: one registered on June 18 pays by September 15 (FTB). That payment covers only the short first year; the next year's $800 is due the following April 15. An LLC formed in November 2026 owes $800 for 2026 by February 16, 2027 (February 15 is Presidents' Day) and another $800 for 2027 by April 15, 2027 (FTB 3522).

There is one narrow exception: a business whose tax year lasts 15 days or fewer and that does no business in that time pays no $800 for it. An LLC formed on December 20, 2026 that stays idle owes no $800 for 2026; its first $800 is due April 15, 2027 (2025 Form 568 instructions). The same rule applies to corporations.

On top of the $800, an LLC taxed as a partnership or disregarded (an LLC taxed as a corporation files Form 100 or 100S and pays no LLC fee) pays a fee once its total California income reaches $250,000. "Total income" means gross income plus cost of goods sold, which in practice is close to your receipts before any expense (Form 568 instructions). A business with thin margins pays the same fee as a profitable one of the same size.

The tiers are from the FTB's LLC page. The FTB can add together the income of several commonly controlled LLCs if it finds they were split up to lower the fee.

The fee for the current year is estimated and paid by the 15th day of the 6th month, June 15 for a calendar year, on Form FTB 3536, and any balance is paid on the same form by the return's due date (FTB 3536 instructions). For tax year 2026 that balance is due March 15, 2027, or April 15, 2027 for a single-member LLC owned by an individual. If the June 15 payment is less than this year's fee, the penalty is 10% of the difference between this year's full fee and what you paid, unless you paid at least last year's fee by then. With a $900 fee last year, a $6,000 fee this year and nothing paid in June, the penalty is $600. Paying at least last year's amount by June 15 is the safe way when income is moving between tiers.

An S corporation pays 1.5% of its California net income, and at least $800. The tax is on profit after salaries, so the 1.5% passes $800 only once net income passes $53,333. A C corporation pays 8.84%, also with the $800 minimum. Neither pays the LLC fee, which is why an LLC with high receipts and modest profit sometimes elects S corporation status.

An LLC formed in Nevada, Delaware or anywhere else pays the $800 if it registers with the California Secretary of State, whether or not it does business here. Registered or not, an LLC or corporation formed elsewhere pays if it is doing business in California: it does business here for financial gain, is commercially domiciled here, or its California sales, property or payroll pass either a yearly dollar amount or 25% of the business's total. For 2025 the amounts were $757,070 of sales and $75,707 of property or of payroll; the 2026 amounts are not published yet. An LLC is also doing business here whenever a member or manager runs it from California, whatever its sales (Form 568 instructions), which is the usual case for an owner who lives here and formed elsewhere. An unregistered out-of-state LLC doing business here also faces a $2,000 penalty.

A two-member design studio is an LLC taxed as a partnership. In 2026 it had $600,000 of receipts and $40,000 of profit.

• $800 annual tax, due April 15, 2026.
• $2,500 LLC fee, for income of $500,000 to $999,999, estimated by June 15, 2026, with any balance due with its return on March 15, 2027.
• Total: $3,300, or 8.25% of its $40,000 profit, before the owners pay any personal income tax.

For 2027 the same amounts fall due April 15 and June 15, 2027. Taxed as an S corporation with the same $40,000 of net income, the business would owe 1.5%, or $600, so the $800 minimum applies. That saves $2,500 a year, though an S corporation also has to put its working owners on payroll, which adds payroll tax and filing costs to weigh against it.

The tax keeps coming until the business is cancelled with the Secretary of State. For the FTB to stop assessing it, the LLC must (Form 568 instructions):

• file a final Form 568 on time, with the final return box checked, and pay the $800 for that final year;
• stop doing business in California after that final year;
• file its cancellation with the Secretary of State within 12 months of that final return.

A calendar-year LLC that does no business after December 31 and whose cancellation takes effect by January 15 owes no $800 for the new year, since that last year lasts 15 days or fewer. An LLC organized in California that never did business, has no debts and has returned any investors' money can file the short form cancellation (Form LLC-4/8) within 12 months of forming and owes no $800 for its first year; an LLC formed in another state cannot use it. Corporations follow the same pattern with a final return and dissolution (FTB). Filing the cancellation late can add another year's $800.

Unpaid $800 and fee amounts are charged 5% of the unpaid amount plus 0.5% for each month it stays unpaid, up to 40 months (penalties), plus interest from the original due date. A business that does not file or pay can be suspended, and the FTB grants no automatic filing extension to a suspended LLC or corporation. Our deadlines guide lists the dates, and our tax filing and bookkeeping services handle them for clients.