United States / Guides / California's $800 Minimum Franchise Tax: Who Owes It and When
United States · guideCalifornia's $800 Minimum Franchise Tax: Who Owes It and When
The short answer
California levies an $800 minimum franchise tax on every corporation, LLC, limited partnership, and limited liability partnership formed in the state or registered to do business there — due whether the entity made money, lost money, or did nothing at all. Corporations get a first-year exemption from the $800 minimum; LLCs, LPs, and LLPs do not, because the temporary exemption that covered them (AB 85) expired for entities formed after December 31, 2023. The tax is billed separately from — and in addition to — any income-based tax the entity owes, and an out-of-state entity that merely registers to transact business in California owes it too, regardless of where its income is earned.
Key facts — verified dates on each
What the franchise tax actually is
California's franchise tax is not an income tax — it is a charge for the privilege of being organized in California or registered to transact business there, administered by the Franchise Tax Board (FTB) alongside the state's income tax system but calculated on different rules. Every corporation, LLC, limited partnership (LP), and limited liability partnership (LLP) subject to California law owes a minimum of $800 a year under this system, regardless of revenue, profit, or activity level.
For corporations, the $800 is a floor: the entity pays the greater of $800 or its calculated franchise tax (8.84% of net income for a C corporation, 1.5% for an S corporation, with its own $800 minimum). For LLCs classified as partnerships or disregarded entities, the $800 is called an 'annual tax' rather than a franchise tax, but it functions the same way — a flat charge that applies before any other tax is computed, plus a separate LLC fee laid on top once gross receipts cross a threshold.
That structural difference — a flat charge tied to legal existence, not to profit — is why an entity that lost money, had no revenue, or never opened its doors can still owe $800 for the year.
Who owes it, including out-of-state entities
The $800 applies to any corporation incorporated in California, any LLC, LP, or LLP organized under California law, and — separately — any out-of-state (foreign) entity that registers or qualifies with the California Secretary of State to transact business in the state. Registering to do business in California is what triggers the tax for a foreign entity; where its income is actually earned or where its owners live does not change that.
An entity that registers with the Secretary of State but never actually conducts business in California can still find itself owing the minimum tax for the years the registration was active, until it formally withdraws or dissolves. FTB and the Secretary of State are separate agencies with separate records, and deregistering with one does not automatically update the other — an entity that no longer operates in California needs to close out both registrations to stop future assessments.
The tax applies once per legal entity per year, not per location — a corporation with three California offices still owes one $800 minimum, not three.
First-year rules: corporations versus LLCs
The first-year treatment differs sharply by entity type, and this is the point most new-business guidance gets stale on. Corporations incorporated or qualified in California on or after January 1, 2000 are exempt from the $800 minimum franchise tax in their first taxable year — they still file a return and still owe tax on any actual net income at the standard rate, but the $800 floor does not apply for that first year.
LLCs, LPs, and LLPs do not currently have a full first-year exemption. A temporary one existed under Assembly Bill 85, but it applied only to entities organized, registered, or filed with the Secretary of State on or after January 1, 2021 and before January 1, 2024 — and it has expired. An LLC, LP, or LLP formed between January 1, 2024 and December 31, 2026 owes the full $800 annual tax for its first taxable year, same as every year after. Recently enacted law changes that again: for first taxable years beginning on or after January 1, 2027 and before January 1, 2030, the first-year annual tax drops to $400 for LLCs (SB 180, Stats. 2026, Ch. 85) and for LPs and LLPs (SB 122, Stats. 2026, Ch. 23) — a reduced first-year charge, not a renewed exemption, and it has a firm sunset date built in.
A separate, permanent rule sometimes gets confused with the expired AB 85 exemption: California's '15-day rule.' If an entity organizes or registers within the last 15 days of its tax year and conducts no business during that short stub period, it can treat that period as if it did not exist — no return required and no minimum tax due for those 15 days. That rule is narrow, applies to the very end of a tax year, and is unrelated to the first-year exemption timeline above.
When the tax is due
For an existing corporation, LLC, LP, or LLP, the $800 is due on the 15th day of the 4th month of the entity's taxable year — April 15 for a calendar-year filer. For a newly formed LLC, LP, or LLP, the first payment is due on the 15th day of the 4th month after the date the entity filed with the Secretary of State, not from January 1 — an entity that forms in November counts that month as month one, putting its first payment due in mid-February.
Corporations pay through their estimated tax vouchers and Form 100 (or Form 100S for S corporations); LLCs pay the $800 with Form 3522 (LLC Tax Voucher) and reconcile everything on Form 568 at year-end. A 7-month automatic filing extension is available — pushing the filing deadline to the 15th day of the 10th month — but it extends only the paperwork deadline, not the payment deadline. Tax owed is still due on the original date regardless of the extension.
LLCs with California-source total income of $250,000 or more owe an additional LLC fee on top of the flat $800 — a separate, graduated charge tied to gross receipts rather than net profit. The estimated fee is due by the 15th day of the 6th month of the taxable year, using Form 3536, well before the $800 payment reconciles on Form 568.
The LLC fee: a second, income-tiered charge
It is worth separating the flat $800 from the LLC fee, because commercial guidance regularly conflates the two. The $800 is fixed and does not vary by size. The LLC fee, assessed under a separate statute, is graduated by the LLC's total California income — defined as gross receipts, not net income — and only applies once that figure reaches $250,000.
The fee is a step function: it jumps to a new fixed amount at each income threshold rather than phasing in gradually, so two LLCs with revenue at opposite ends of the same bracket pay the identical fee. This income-tiered fee has no analogue for corporations — corporate franchise tax is instead based on net income at a flat rate, not a bracket schedule.
- $250,000–$499,999 in total income: $900 fee
- $500,000–$999,999: $2,500 fee
- $1,000,000–$4,999,999: $6,000 fee
- $5,000,000 and above: $11,790 fee
Where this fits with the books
None of these figures are something a bookkeeper calculates or a CPA guesses at — the $800 amount, the first-year rule that applies to a given entity type, and which LLC fee bracket applies are all determined by the entity's formation date, entity type, and actual income, confirmed against FTB's current guidance. What clean books provide is the gross-receipts figure the LLC fee bracket depends on, and a general ledger that reconciles cleanly to whatever Form 100, 100S, or 568 the entity's CPA ultimately files.
CapEasy's bookkeeping work keeps that ledger current and hands the CPA a trial balance that maps to the return — it does not determine entity classification, does not calculate the franchise tax or LLC fee owed, and does not file with FTB or the Secretary of State. Those determinations stay with the entity's CPA or counsel, who can confirm the current-year figures directly against FTB's published guidance before a return is filed.
The figures, and when we checked them
These numbers change by year or by notification. Each one shows the date we last verified it against the source — if that date looks old, check the source before relying on it.
Questions on this
Does every California LLC have to pay the $800 minimum tax?
Yes. Every LLC organized in California, and every out-of-state LLC registered to do business there, owes the $800 annual tax each year regardless of revenue, profit, or whether the LLC did any business at all — unless it qualifies for the narrow 15-day rule for entities formed at the very end of a tax year.
Is there still a first-year exemption for new LLCs?
No, not the full exemption. The one created by Assembly Bill 85 applied only to LLCs, LPs, and LLPs formed on or after January 1, 2021 and before January 1, 2024, and it has expired — an entity formed from 2024 through 2026 owes the full $800 for its first taxable year. A separate, newly enacted law then reduces that first-year charge to $400 for taxable years beginning on or after January 1, 2027 and before January 1, 2030, before the full $800 resumes.
Do corporations get a first-year exemption from the $800 minimum?
Yes, and this exemption is still active. A corporation incorporated or qualified in California on or after January 1, 2000 is not required to pay the $800 minimum franchise tax in its first taxable year, though it still owes tax on any actual net income and still must file a return.
What is California's 15-day rule?
A permanent rule, separate from the expired AB 85 exemption: an entity that organizes or registers within the last 15 days of its tax year and conducts no business during that stub period can treat that period as if it did not exist — no return and no minimum tax due for those 15 days.
When is the first $800 payment due for a newly formed LLC?
On the 15th day of the 4th month after the LLC's filing date with the Secretary of State — not from January 1. An LLC that files in November, for example, owes its first payment by mid-February.
Does an out-of-state company owe California franchise tax just for registering there?
Yes. Registering or qualifying with the California Secretary of State to transact business in the state triggers the $800 minimum, independent of where the entity actually earns its income. The registration itself creates the obligation until the entity formally withdraws.
What is the LLC fee, and how is it different from the $800 tax?
The LLC fee is a separate, additional charge that applies once an LLC's total California income (gross receipts, not net profit) reaches $250,000. It steps up through fixed brackets — $900, $2,500, $6,000, or $11,790 — on top of, not instead of, the flat $800 annual tax.
What happens if the $800 is not paid?
FTB assesses penalties and interest on the unpaid balance and can suspend the entity's legal standing in California, which affects its ability to enforce contracts and maintain limited-liability protection in the state. The entity's CPA or counsel is the right party to address a specific unpaid-balance situation with FTB.
Is the $800 minimum franchise tax deductible?
Whether and how the payment affects a particular return depends on the entity's facts and is a determination for its CPA, not something to assume from general guidance.
Does a single-member LLC (disregarded for federal tax purposes) still owe the $800?
Yes. Federal disregarded-entity treatment does not change California's franchise tax rules — a single-member LLC organized or registered in California owes the same $800 annual tax as a multi-member LLC, and the same LLC fee brackets apply if its total income crosses $250,000.
Primary sources
- California FTB — Corporations
- California FTB — Limited Liability Company
- California Revenue and Taxation Code §17941 — LLC annual tax
- California Revenue and Taxation Code §17942 — LLC fee
- California Revenue and Taxation Code §23153 — corporation minimum franchise tax and first-year exemption
- California Revenue and Taxation Code §17935 — LP annual tax
- California Revenue and Taxation Code §17948 — LLP annual tax
Last reviewed 2026-08-14. Statutes and schedules change — the sources above are authoritative, this page is orientation.
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