California LLC $800 Franchise Tax: Who Pays and When

Who has to pay the $800?

Any LLC that is organised in California, registered to do business in California, or actually doing business in California owes the annual minimum franchise tax. All three routes count, and the third is the one that surprises people.

Doing business in California is broader than having an office there. It can include having California-sourced sales above a threshold, property in the state, or payroll in the state. A Wyoming or Delaware LLC with genuine California operations can owe the $800 in California despite never filing there voluntarily.

This is why forming in a cheap state to escape California rarely works for someone who actually lives and operates in California. The company still meets the doing-business test, still owes the $800, and now also pays Wyoming or Delaware fees on top - two sets of costs instead of one.

When is the $800 due?

The annual minimum franchise tax is generally due by the 15th day of the 4th month of the taxable year - 15 April for a calendar-year LLC. It is paid to the Franchise Tax Board, separately from anything filed with the Secretary of State.

Note the timing carefully: this is a tax for the current year, paid early in that year, not a bill arriving after you have earned something. That structure is exactly why a company with no revenue still gets an $800 liability.

California also requires an annual LLC return, and a Statement of Information with the Secretary of State within 90 days of registering and every two years afterwards. Those are separate obligations with separate deadlines, and satisfying one does not satisfy the others.

• $800 minimum tax to the Franchise Tax Board, generally by 15 April.
• Annual LLC return to the FTB, separately.
• Statement of Information to the Secretary of State, initially then biennially.

What is the gross receipts fee?

On top of the $800, California charges an additional LLC fee once total California-sourced gross receipts pass $250,000. It is based on receipts, not profit, so a business with high turnover and thin margins can owe it while barely breaking even.

The fee is banded. Receipts of $250,000 to $499,999 attract $900; $500,000 to $999,999 attract $2,500; $1,000,000 to $4,999,999 attract $6,000; and $5,000,000 or more attract $11,790. Each band is a flat amount rather than a percentage.

Because the bands step rather than taper, crossing a threshold by a small amount costs the full increment. A business at $999,000 in California receipts owes $2,500; at $1,000,001 it owes $6,000. Worth knowing if you are near a boundary at year end.

Does a dormant California LLC still owe $800?

Generally yes, and this is the most expensive misunderstanding in California. The tax is on the privilege of existing as a registered entity, not on income. A company that never traded, never opened a bank account and never had a customer still accrues it for each year it remains registered.

The consequence compounds. An LLC left registered for four unused years can accrue $3,200 plus penalties and interest, and the Franchise Tax Board pursues those balances. Founders who formed a California LLC for a project that never launched routinely discover this years later.

The only reliable way to stop it is to cancel the LLC properly with the Secretary of State and file a final return with the FTB. Simply abandoning it does not stop the meter - the state continues to regard the company as existing, because on its records it does.

How do you stop owing it?

File a Certificate of Cancellation with the California Secretary of State, and file a final LLC return with the Franchise Tax Board marked final. The obligation stops based on when cancellation is completed, not when you decided to stop trading.

Bring outstanding filings and taxes current first. California generally expects the account settled as part of closing, and unpaid balances follow the entity and can complicate future filings in the state.

Timing matters more here than in most states. Because the $800 is due early in the tax year for that year, letting a cancellation drift into a new tax year can trigger another $800 for a company you have already stopped using. If you are closing a California LLC, closing it before the new tax year begins is worth real money.

Before forming in California at all, price this properly: $70 to file, $800 every year regardless of activity, $20 Statement of Information biennially, plus the gross-receipts fee above $250,000. That is a legitimate cost for a business genuinely operating there, and a poor deal for one that is not.

• File the Certificate of Cancellation with the Secretary of State.
• File a final FTB return marked final.
• Close before the new tax year starts, or another $800 accrues.