California’s $800 minimum franchise tax is an annual charge that every corporation, LLC, limited partnership, and limited liability partnership owes for the privilege of existing in the state, whether or not the business makes a dime. Corporations get a permanent pass on their first taxable year under Revenue and Taxation Code Section 23153.1California Legislative Information. California Code Revenue and Taxation Code 23153 LLCs, LPs, and LLPs had a temporary first-year waiver that expired on January 1, 2024, and now owe the full $800 from year one.
Who Owes the $800 and When It’s Due
For corporations, the tax runs from the date of incorporation, the date of qualification to do business in California, or the date the corporation actually starts doing business here, whichever comes first. It keeps running every year until the corporation formally dissolves or withdraws.1California Legislative Information. California Code Revenue and Taxation Code 23153
LLCs owe an identical $800 under a separate statute, Section 17941. The clock starts when the Secretary of State accepts articles of organization or issues a certificate of registration, and it stops only when the LLC files a certificate of cancellation.2California Legislative Information. California Code Revenue and Taxation Code 17941 An LLC that never signs a contract, never opens a bank account, and never earns a cent still owes $800 a year until it is cancelled with the state.
Payment is due on the 15th day of the fourth month of the taxable year for both corporations and LLCs, which lands on April 15 for calendar-year entities.3Franchise Tax Board. Due Dates Businesses Profit, loss, or complete inactivity makes no difference to the bill.4Franchise Tax Board. C Corporations
First-Year Exemption for Corporations
Section 23153(f) exempts every corporation that incorporates or qualifies to do business in California on or after January 1, 2000, from the minimum franchise tax for its first taxable year.1California Legislative Information. California Code Revenue and Taxation Code 23153 It has no sunset date. A foreign corporation that has never previously done business in California can also use it when it first qualifies, because the statute covers any corporation that qualifies to do business for the first time.
Three limits are worth knowing:
- A corporation that reorganizes for the purpose of avoiding the minimum franchise tax does not qualify.
- Only the $800 flat minimum is waived. If tax based on net income exceeds $800 in the first year, the corporation owes that larger amount.
- Section 23153(f)(2) lists entity types that cannot use the exemption at all, including LLCs, limited partnerships, limited liability partnerships, regulated investment companies, and real estate investment trusts.
The LLC, LP, and LLP First-Year Waiver Is Gone
Between January 1, 2021, and January 1, 2024, LLCs, limited partnerships, and limited liability partnerships had their own first-year waiver under AB 85 (Chapter 8, Statutes of 2020). The LLC version was codified in Section 17941(g), and AB 85 amended Sections 17935 and 17948 to give LPs and LLPs the same relief.5Franchise Tax Board. Limited Liability Company Limited Liability Partnership and Limited Partnership First Year Annual Tax Exemption
That window has closed. Any LLC, LP, or LLP formed in California in 2024 or later owes the full $800 in its first taxable year.6Franchise Tax Board. Limited Liability Company Because payment is due on the 15th day of the fourth month of the taxable year, a new LLC formed in early 2025 will typically see the bill within its first few months.
The Extra LLC Fee Based on Gross Income
LLCs owe a second, separate charge on top of the $800. Under Section 17942, an LLC with California-source total income of $250,000 or more pays a fee based on gross income, not net profit:
- $250,000 to $499,999 in total income: $900
- $500,000 to $999,999: $2,500
- $1,000,000 to $4,999,999: $6,000
- $5,000,000 or more: $11,790
Because it runs off gross income, the fee hits even when the LLC loses money. An LLC with $600,000 in revenue and $590,000 in expenses still owes $2,500 on top of the $800 annual tax. The estimated fee is due by the 15th day of the sixth month of the taxable year and is reconciled on Form 568.6Franchise Tax Board. Limited Liability Company This fee applies only to LLCs, not to corporations, LPs, or LLPs.
What Happens If You Don’t Pay
Late payment carries a penalty of 5% of the unpaid tax plus 0.5% per month until paid.8Franchise Tax Board. Common Penalties and Fees If the Franchise Tax Board sends a written demand to file missing returns and the business does not comply within 60 days, the penalty rises to $2,000 per tax year. The Secretary of State can add a $250 penalty for failure to file the required Statement of Information.9Franchise Tax Board. My Business Is Suspended
The bigger consequence is suspension or forfeiture. The FTB sends delinquent entities to the Secretary of State, and once the business is suspended it loses its right to operate in California. A suspended entity cannot transfer real property, cannot bring or defend a lawsuit, and enters contracts that the other party can later void. The Secretary of State may release the entity’s name for someone else to take, forcing a name change when the business tries to come back.9Franchise Tax Board. My Business Is Suspended
How to Stop the Tax by Closing the Entity
The $800 keeps accruing every year until the entity is formally closed with both the Franchise Tax Board and the Secretary of State. Going dormant is not closing.10Franchise Tax Board. Closing a California Business Entity
With the FTB, that means filing every delinquent return, paying the balance plus penalties and interest, and filing a final-year return with the “Final Return” box checked. With the Secretary of State, it means filing dissolution paperwork for a corporation, surrender paperwork for a foreign entity, or a certificate of cancellation for an LLC, all within 12 months of filing the final tax return.
A suspended entity has to be revived before it can be closed, which means filing all missing returns and paying everything owed first. One narrow escape hatch exists for LLCs: if the LLC never conducted business or has stopped and holds no remaining assets, it can request a voluntary administrative cancellation from the Secretary of State, which may allow the FTB to abate unpaid taxes, penalties, and interest.
Owners who walk away from a dormant entity without formally closing it often find out years later that $800 per year, compounded with penalties and interest, has grown into a serious bill they must clear before they can even dissolve.