What is the California $800 LLC minimum franchise tax and how does it affect my small business?
The $800 annual LLC tax is California’s minimum franchise tax that every LLC registered or doing business in the state owes to the Franchise Tax Board. It applies whether your LLC made a million dollars or zero. The payment is due by the 15th day of the 4th month after your taxable year begins, which means April 15 for calendar year filers.
Most small business owners are caught off guard by this because they assume taxes are tied to income. This one isn’t. It’s the price of maintaining LLC status in California. You owe it even if your business lost money, sat dormant all year, or never opened its doors. File Form 3522 with the payment.
The first-year exemption that existed for LLCs formed between 2021 and 2023 has expired. New LLCs formed in 2024 and later owe the $800 in year one like everyone else. If you formed your LLC during the exemption window, you got a one-year break, but every year after still requires the full amount.
What most owners miss is the second LLC fee that stacks on top of the $800. If your California gross receipts exceed $250,000, you owe an additional fee ranging from $900 to $11,790 depending on the revenue bracket. At $500,000 in gross receipts, you’re paying $2,500 on top of the $800. At $1 million, it jumps to $6,000 plus the $800. Growing businesses get surprised by this one constantly because the $800 gets all the attention.
This tax factors into entity structure decisions for new businesses. A sole proprietorship doesn’t pay it. An LLC does. If your business generates modest income and has low liability exposure, the $800 might not be worth the protection. If you’re holding real estate, running a contracting business, or any operation with meaningful lawsuit risk, the $800 is cheap insurance compared to losing personal assets. Working with Pasadena bookkeepers who track these deadlines keeps the penalty and interest from piling up when you forget.
The entity overhead adds up quickly when you have multiple LLCs, which is common for real estate investors who hold each property in a separate entity for liability segregation. Five properties in five LLCs means $4,000 in minimum taxes alone before you’ve accounted for any gross receipts fees. That’s real money to factor into how many separate entities you actually need.
Budget for this annually and mark April 15 on the calendar. Missing the payment triggers penalties and interest that compound fast, and the FTB is aggressive about collecting.
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