California minimum tax and LLC fee: who owes it and when

Who owes California's minimum tax?

An LLC not taxed as a corporation generally owes California's $800 annual tax if it is organized, registered, or doing business in California. A corporation owes the $800 minimum franchise tax on the same basic triggers, subject to the exceptions below (2026 LLC tax voucher; FTB: Corporations).

An LLC taxed as a corporation follows the corporation rules and files Form 100 or 100S, rather than paying the separate LLC annual tax or filing Form 568 for that classification period (Form 568 instructions; Revenue and Taxation Code section 17941). For C corporation treatment, the LLC files federal Form 8832, signed by all current members or an authorized officer, manager, or member; affected former owners also sign for a retroactive election. Its effective date generally cannot precede filing by more than 75 days (Form 8832 instructions). An eligible LLC can elect S corporation status on Form 2553 instead. An authorized officer signs, current or affected former owners consent, and the form is generally due two months and 15 days after the effective tax year begins (Form 2553 instructions). See How LLCs are taxed for the classification choice.

Do I owe it with no income or no activity?

Yes, a registered LLC or corporation can owe its annual tax and return even with no revenue, a loss, or no California operations. For a registered LLC, the annual tax continues until the proper cancellation reaches the Secretary of State; a zero-income year does not cancel registration (Revenue and Taxation Code section 17941; Form 568 instructions).

Registration and activity are separate tests. An out-of-state entity that never registered and never did business in California is not made subject to the minimum tax merely by existing elsewhere. California-source income can still create a return or income-tax obligation even when the entity is not doing business; a nonregistered out-of-state LLC taxed as a partnership may file Form 565 instead of Form 568 (FTB: LLC filing requirements; 2026 Form 100-ES instructions).

Does an LLC formed elsewhere owe tax if I run it from California?

Usually, yes. Forming an LLC elsewhere does not avoid California tax when its business is directed or managed from California, or when a member, manager, or agent does business here for the LLC. California calls the place where the business is directed or managed its commercial domicile (FTB Legal Ruling 2014-01; Form 568 instructions).

California tax filing and Secretary of State registration are separate. An out-of-state LLC entering into repeated business transactions in California may also need to register; filing Form 568 does not register it (FTB Legal Ruling 2014-01; Form 568 instructions).

California also counts an entity as doing business when its in-state sales, property, or payroll exceed either that year's indexed dollar threshold or 25% of its total for that measure, including its share from certain pass-through entities. Check the FTB table for the tax year; if that year is not posted, do not reuse an earlier dollar figure. A nonregistered LLC that helps manage another LLC doing business in California may itself be doing business here (Form 568 instructions). California sales and California *doing business* are different tests, so do not use a customer address alone to decide the annual tax.

Is the first year exempt?

A corporation incorporated in California or qualified through the California Secretary of State generally skips the minimum franchise tax in its first taxable year, but still pays tax on California net income. An out-of-state corporation doing business here without qualifying does not get that waiver. The temporary first-year LLC annual-tax waiver has ended; an LLC beginning a tax year now generally pays the annual tax from its first year (Form 100 instructions; Form 100S instructions; FTB: LLC annual tax).

An LLC with a taxable year of 15 days or less and no California business during that period need not file or pay the LLC annual tax or fee for that short year. Corporations have a comparable short-year minimum-tax exception. A California-organized LLC that never conducted business may qualify for short-form cancellation within 12 months and first-year annual-tax relief if it meets the other conditions. An LLC that operated does not qualify for short-form cancellation (Form 568 instructions; FTB: Corporations).

A small LLC solely owned by a deployed U.S. service member may also be exempt from the annual tax if it operates at a loss or ceases operations during deployment; it still files Form 568 to claim the exemption (2026 LLC tax voucher; Form 568 instructions).

When do I pay, and which form do I use?

The LLC annual tax is prepaid by the 15th day of the fourth month of its tax year, using FTB 3522 or California's online payment service. Form 568 is a separate return; do not send the annual-tax payment with it (2026 LLC tax voucher; Form 568 instructions).

A single-member LLC owned by a pass-through entity may have the third-month Form 568 deadline instead. If an already existing out-of-state LLC first starts California business after its fourth-month payment date, the 2026 voucher says to pay the annual tax immediately. A weekend or holiday moves a deadline to the next business day (business due dates).

How much is the LLC fee on top of the annual tax?

An LLC not taxed as a corporation owes an additional fee when its total income derived from or attributable to California reaches $250,000. For a seller, start with California sales before subtracting inventory costs or operating expenses; other California income can also count. The fee is not based on net profit. Form 568 Schedule IW calculates the total. Sales of services are generally assigned where the customer receives the benefit, so an LLC working in California may need to separate California income from income assigned elsewhere (Form 568 Schedule IW instructions).

Allocations, distributions, and gains from another LLC already subject to the fee are excluded from this measure (Form 568 Schedule IW instructions).

The FTB fee chart sets these tiers. An underpaid fee estimate may trigger a 10% penalty on the shortfall, with relief if the timely estimate was at least the prior year's fee (FTB: Common penalties).

What do S corporations and C corporations pay?

California generally charges an S corporation or C corporation the greater of its applicable tax on California net income or the $800 minimum franchise tax, after any first-year exception. Neither pays the LLC fee merely because it is a corporation (FTB: C corporations; FTB: S corporations; business due dates).

The rates and forms come from the FTB S corporation and C corporation pages. Financial S corporations have a different rate. A small corporation solely owned by a deployed U.S. service member may also avoid the minimum tax if the owner is deployed during the tax year and the corporation operates at a loss or ceases operations (2026 estimated-tax instructions). An LLC electing S or C corporation status uses these corporation rules. A corporation with only California-source income but no incorporation, registration, or California business can have an income-tax return without the minimum franchise tax (2026 Form 100-ES instructions). For the separate pass-through entity elective tax, see California's pass-through entity tax election.

What if I missed prior payments or returns?

Unpaid California annual taxes can accumulate by year, along with late-payment charges and interest. An LLC taxed as a partnership may also face a $18 penalty for each member for each month or part-month its Form 568 is late, up to 12 months, unless reasonable cause applies. A disregarded single-member LLC can face other late-filing or payment penalties (FTB: Common penalties).

Start by gathering the entity's Secretary of State status and registration date, FTB notices, prior returns and payment records, California sales records, and the date California activity began or ended. A suspended entity cannot use ordinary termination filings until its status is resolved. A qualifying domestic LLC or corporation may instead request voluntary administrative cancellation or dissolution while suspended (FTB: Suspended businesses; FTB: Voluntary administrative cancellation).

An out-of-state business that has not received an FTB filing notice may qualify for a voluntary compliance program. If a notice or bill has arrived, follow its response deadline; program eligibility may already be lost (FTB: Voluntary compliance programs). If federal business returns were also missed, see Catching up on unfiled business returns.

How do I stop the annual tax when I close?

A California-registered LLC generally stops future annual-tax exposure by ceasing California business, filing a final return, and filing the appropriate cancellation with the Secretary of State. Corporations dissolve or surrender their California registration as applicable; simply stopping work or marking a return final does not by itself end a registered LLC's annual tax (FTB: Closure guide; Revenue and Taxation Code section 17941).

To avoid minimum or annual tax for current and later years, the FTB requires a timely final return for the preceding taxable year, no California business after that year, and Secretary of State termination papers within 12 months of filing the final return. Delinquent returns and balances must also be resolved for ordinary closure (FTB: Closure guide). A nonregistered out-of-state entity has no California registration to cancel, but may still need a California return if it retains California-source income (FTB: LLC filing requirements). A suspended entity may need revivor before ordinary cancellation. A domestic, asset-free entity that has stopped business may qualify for voluntary administrative cancellation or dissolution; it must still file state termination papers, and earlier taxes remain due.

Example

Illustrative amounts in US dollars. A single-member LLC was formed in another state and is run by its owner from California. It has $320,000 of California revenue and $100,000 of costs and other expenses, leaving $220,000 of profit. It is not registered in California and has not elected corporate tax treatment.

Because its owner conducts the LLC's business in California, the LLC generally files Form 568 and owes the $800 annual tax. Its $320,000 of California total income falls in the first fee tier, so it also owes a $900 LLC fee. The fee is based on California total income, not the $220,000 profit. If this existing LLC began California business after its normal fourth-month annual-tax deadline, it should pay the annual tax immediately. Its income-tax return may also reflect the owner's tax, which is separate from the LLC's annual tax and fee.

Different for you?

• The LLC elected corporate tax treatment: its filing and annual-tax rules change. See How LLCs are taxed.
• You are choosing between an LLC and a corporation: compare structure before forming in LLC or C corporation.
• You have years of California notices, an out-of-state LLC, or a suspended entity: gather the registration record, FTB notices, activity dates, returns, and payments for tax preparation.
• You are closing a registered entity: gather the final-year records and cancellation status for tax preparation.
• You also owe another state's franchise tax: see Delaware franchise tax.
• You need federal business-return forms: see Which returns your business files.
• You sell to California customers: sales-tax registration has separate tests; see When you must collect sales tax.