California LLC $800 Minimum Franchise Tax (2026) — What It Is & How to Pay

What Is the California LLC $800 Franchise Tax?

California Revenue and Taxation Code Section 17942 imposes an annual minimum franchise tax on every LLC that is organized in California or that is registered to do business in California as a foreign LLC. The minimum amount is $800 per taxable year, and it applies regardless of whether the LLC generated any revenue, had any employees, or was even actively operating.

The tax is administered by the California Franchise Tax Board (FTB) — the same agency that collects personal income tax. Despite the name 'franchise tax,' it is not a tax on franchises in the common sense. In California, 'franchise tax' simply refers to the privilege of doing business in the state. Every LLC pays it as the price of maintaining a legal existence in one of the world's largest economies.

The $800 floor is distinct from California's LLC fee (also called the gross receipts fee), which applies on top of the minimum if your LLC earns more than $250,000 in California-sourced gross receipts. See the 'Gross Receipts Surcharges' section below for the full tier schedule.

When Is the $800 Tax Due?

For most California LLCs, the $800 annual tax is due by the 15th day of the 4th month of each taxable year. For calendar-year LLCs (which most single-member LLCs use), that means April 15. For fiscal-year LLCs, it is the 15th day of the 4th month of their fiscal year.

New LLCs have a first-year deadline that often surprises owners: if you form your LLC mid-year, your first $800 payment is due on the 15th day of the 4th month after your formation date — not on the next calendar April 15. For example, if you file your Articles of Organization on September 1, your first $800 payment is due December 15 of that same year (or, if the first-year exemption applies, the following April 15).

Subsequent tax years follow the standard schedule: April 15 for calendar-year LLCs. The FTB requires estimated payments to be made using Form 3522 (LLC Tax Voucher). If your LLC also has gross receipts over $250,000, you will additionally use Form 3536 for estimated LLC fees.

• Calendar-year LLCs: April 15 each year
• Fiscal-year LLCs: 15th day of the 4th month of your fiscal year
• New LLCs: 15th day of the 4th month after your formation date (subject to first-year exemption)
• Form 3522 must accompany each annual $800 payment
• Form 3536 is used for estimated LLC fees when gross receipts exceed $250,000

First-Year Exemption: The 2021 Rule Change

California Assembly Bill 85, signed in June 2020 and effective for tax years beginning on or after January 1, 2021, eliminated the $800 minimum franchise tax for the first taxable year of a newly formed LLC, LP, or corporation. This is one of the most important rule changes for new California LLC owners in recent history.

Under the exemption, if your LLC is formed on or after January 1, 2021, you do not owe the $800 tax for your first taxable year. 'First taxable year' means the period from your formation date through December 31 of that same calendar year (for calendar-year LLCs). Your first $800 payment is therefore due April 15 of the following year — your second taxable year.

Example: You form your California LLC on March 10, 2026. Your first taxable year runs March 10 to December 31, 2026. No $800 is owed for 2026. Your first payment of $800 is due April 15, 2027 (for the 2027 taxable year).

The exemption is automatic — you do not need to file any special form to claim it. Simply do not pay (or file Form 3522) for your first year. Starting in your second taxable year, the standard $800 minimum and April 15 due date apply.

How to Pay: Form 3522 and Form 3536

The FTB provides two forms for LLC tax payments, and confusing them is a common mistake:

• Form 3522 (LLC Tax Voucher): Used to pay the $800 annual minimum franchise tax. Every LLC that owes the minimum tax files this form.
• Form 3536 (Estimated Fee for LLCs): Used to pay estimated LLC fees (gross receipts surcharges) if your LLC expects to earn more than $250,000 in California gross receipts during the tax year. This is due by the 15th day of the 6th month of your taxable year (June 15 for calendar-year LLCs).

Step-by-step payment process using FTB Web Pay (recommended):

• Go to ftb.ca.gov and navigate to 'Make a Payment' under the Business section.
• Select 'Web Pay for Businesses' and choose 'LLC' as your entity type.
• Enter your California Secretary of State (SOS) number and your LLC's Federal Employer Identification Number (FEIN).
• Select the tax year you are paying and choose the payment type: 'Annual LLC Tax' for the $800 minimum.
• Enter your bank account details for ACH debit and submit. You will receive a confirmation number — save it.

You can also mail a check payable to 'Franchise Tax Board' along with the paper Form 3522 voucher to: Franchise Tax Board, PO Box 942857, Sacramento, CA 94257-0631. If you mail a payment, allow 7–10 business days and keep your certified mail receipt.

California LLCs must also file Form 568 (LLC Return of Income) annually by the 15th day of the 3rd month after the close of the taxable year (March 15 for calendar-year LLCs). Form 568 is the annual information return and reports gross receipts, deductions, and the $800 tax — it is separate from the payment voucher.

What Happens If You Miss the Deadline?

The FTB enforces the $800 minimum tax aggressively. Missing the April 15 due date triggers an immediate $100 late payment penalty under California Revenue and Taxation Code Section 19132, plus daily interest on the unpaid balance at the current FTB interest rate (approximately 7–9% annualized, adjusted quarterly).

If you continue to miss payments, the FTB can place your LLC on the 'Suspended' or 'Forfeited' list maintained by the California Secretary of State. A suspended LLC cannot legally do business in California, enter contracts, or maintain lawsuits. Reinstating a suspended LLC requires paying all back taxes, penalties, interest, and a $100 reinstatement fee to the SOS.

• $100 late payment penalty applied immediately after the due date
• Interest accrues daily on the unpaid balance
• FTB can issue a Notice of Tax Lien against LLC assets
• Continued non-payment leads to administrative suspension by the SOS
• Suspended LLCs cannot transact business, sue, or be defended in court
• Reinstatement requires clearing all back taxes, penalties, and paying a $100 SOS fee

If you missed a payment and need to get current, pay immediately online via FTB Web Pay. The penalty for late payment of the annual tax is fixed at $100, but interest compounds daily, so acting quickly minimizes the total cost. You can request a penalty abatement from the FTB if this is your first-time offense and you can show reasonable cause — call the FTB Business Entity line at (800) 852-5711.

Gross Receipts Surcharges: When You Owe More Than $800

The $800 minimum franchise tax is just the floor. California also imposes an additional LLC fee based on the total California gross receipts of your LLC. These surcharges apply on top of the $800 — they are not a replacement for it. The fee tiers for 2026 are:

• $0 — $249,999 in gross receipts: No additional fee (only the $800 minimum applies)
• $250,000 – $499,999 in gross receipts: $900 additional fee ($1,700 total)
• $500,000 – $999,999 in gross receipts: $2,500 additional fee ($3,300 total)
• $1,000,000 – $4,999,999 in gross receipts: $6,000 additional fee ($6,800 total)
• $5,000,000 or more in gross receipts: $11,790 additional fee ($12,590 total)

'California gross receipts' means the total income your LLC received from California-sourced activities — before deducting any expenses. For service-based LLCs, this is typically revenue from clients located in California. For product-based LLCs, it includes sales to California customers. Receipts from outside California are not included.

The LLC fee is estimated and paid during the year using Form 3536, due by the 15th day of the 6th month of your taxable year (June 15 for calendar-year filers). You reconcile the actual fee on your annual Form 568. If your estimated fee was too low, you may owe additional amounts when you file Form 568 in March.

Foreign LLCs Operating in California

If you formed your LLC in another state — Delaware, Wyoming, Nevada, or anywhere else — but you do business in California, you are required to register as a foreign LLC with the California Secretary of State and pay the $800 annual minimum franchise tax. This is one of the most common misconceptions among entrepreneurs who form LLCs in 'tax-friendly' states.

The FTB defines 'doing business in California' broadly. You are doing business in California if you are organized or commercially domiciled there, if your California sales exceed $690,144 (2026 threshold), if the value of your California property exceeds $69,014, or if you pay more than $69,014 in California compensation. Most LLCs with a California owner, employees, or customers will meet at least one of these thresholds.

The registration process for a foreign LLC involves filing Form LLC-5 (Application to Register a Foreign LLC) with the California SOS and paying a $70 filing fee. Once registered, the LLC owes $800 per year to the FTB just like a domestic California LLC. The first-year exemption (post-2021) applies to foreign LLCs as well.

Can You Avoid the $800 Tax?

The honest answer is: no, not while your LLC is active and doing business in California. The $800 minimum franchise tax is a cost of maintaining an LLC in California, and the law leaves no income-based exemption (other than the first-year waiver for new LLCs formed after 2020).

The only way to permanently stop owing the $800 is to formally dissolve your California LLC (or withdraw your foreign LLC registration). To dissolve a domestic California LLC, you file a Certificate of Dissolution (Form LLC-3) and a Certificate of Cancellation (Form LLC-4/7) with the SOS, and file a final Form 568 with the FTB marked as a final return. Once the cancellation is effective, no further $800 taxes accrue.

Important timing note: if you dissolve your LLC after January 1 but before the April 15 tax due date, you may still owe the $800 for the full year in which you dissolved. The FTB generally considers the tax earned at the start of the taxable year. Dissolving on December 31 avoids owing for the next year; dissolving on January 5 still triggers that year's $800.

Some business owners consider converting to a sole proprietorship or S corporation to escape the LLC fee. However, S corporations owe California's franchise tax minimum of $800 as well (based on net income, with a minimum of $800). A sole proprietorship avoids the entity tax but provides no liability protection. Consult a California CPA or tax attorney before restructuring solely to minimize the franchise tax.

• No legal way to avoid the $800 while your LLC is active and doing California business
• Formal dissolution of the LLC is the only permanent solution
• Dissolving in December (not January) avoids triggering the next year's tax
• File Form LLC-3 (Dissolution) and Form LLC-4/7 (Cancellation) to stop accruing taxes
• File a final Form 568 with the FTB marked as a final return
• S corporations also owe California's $800 minimum — conversion does not help

Compare California to Low-Tax States

California's $800 annual tax stands in sharp contrast to states with no annual LLC tax. Here is how the most commonly compared states stack up:

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