California charges every LLC a minimum $800 franchise tax each year, whether the business made a dollar or not. There's no first-year pass anymore. The exemption that used to waive it expired at the end of 2023, so any LLC formed in 2026 owes the full $800 in year one.
Forming the LLC itself is a short filing. Staying compliant with California afterward is where the real cost and paperwork live, and that's the part most generic guides gloss over.
TL;DR
- The $800 tax is permanent: every California LLC owes an $800 minimum annual franchise tax, with no first-year exemption for LLCs formed in 2024 or later.
- Step 1, name: check availability with the California Secretary of State and reserve it for 60 days if you're not ready to file.
- Step 2, agent for service of process: California's term for a registered agent, and there's no separate form to change one.
- Step 3, Articles of Organization: file Form LLC-1 with the California Secretary of State through bizfile Online.
- Step 4, EIN without an SSN: the IRS phone, fax, or mail route works for founders without an SSN or ITIN.
- Step 5, Form 5472: a 25%+ foreign-owned single-member LLC files this every year, even at zero revenue.
- Step 6, ongoing compliance: the $800 franchise tax, a biennial Statement of Information, and a gross-receipts fee above $250,000 in California income all run on separate schedules.
- Common mistakes: assuming a Wyoming or Delaware LLC dodges the $800 tax is the one that costs California-based founders the most.
Why Form Your LLC in California?
California gives founders access to the largest concentration of tech investors, engineering talent, and enterprise customers in the country. For a startup building in or around Silicon Valley, that proximity can matter more than the cost of forming elsewhere.
That access comes at a real price. California's $800 minimum franchise tax applies every year regardless of income, on top of a filing fee and a separate biennial report most other states don't require.
One caveat worth knowing before you form anything: venture investors typically want the company they're funding to be a Delaware C-corp, not a California LLC. An LLC alone doesn't unlock the fundraising advantage California's ecosystem is known for. Founders planning to raise equity funding should weigh that against the LLC route before filing.
Step 1: Choose and Reserve Your LLC Name
Your LLC's name has to be distinguishable from other entities already on file with the California Secretary of State.
- Include a designator like "LLC" or "Limited Liability Company."
- Search first. The Secretary of State's business search tool shows whether a name is already taken before you file anything.
- Reserve it if you're not ready to file. California holds a name for 60 days, and the reservation fee is commonly cited around $10, though we'd confirm that figure directly with the Secretary of State before paying it.
- No publication requirement for LLC formation itself. That rule exists for a separate fictitious business name (DBA) filing, not for forming the LLC.
Step 2: Appoint an Agent for Service of Process
California calls its registered agent an "agent for service of process." Functionally it's the same role: a person or company with a physical California address, available during business hours to accept legal documents on the LLC's behalf.
- An individual agent must be a California resident with a street address, not a PO box.
- A commercial agent registers with the state using Form 1505 before it can act as an agent for other businesses.
- There's no dedicated "change of agent" form. If you switch agents later, you update the change through your Statement of Information rather than filing a separate document, which trips up founders expecting a standalone form.
Step 3: File Your Articles of Organization (Form LLC-1)
Form LLC-1 is the filing that legally creates your LLC. You file it with the California Secretary of State, most commonly through the bizfile Online portal.
- Filing fee: commonly cited at $70. This is the current fee as far as we could verify, but confirm it on the Secretary of State's site before you file, since fee schedules change.
- Standard processing time: California doesn't publish a fixed day count for standard filings, and it can vary, sometimes running several weeks depending on volume.
- 24-Hour Filing (Class C): $350.
- Same-Day Filing (Class B): $750, and the filing must arrive by 9:30 a.m.
- 4-Hour Filing (Class A): $500, available only for documents dropped off in Sacramento.
- 24-Hour Preclearance: $500, also drop-off only.
- Special handling fee: a $15 fee applies to drop-off filings on top of the expedite fee.
Once the Secretary of State accepts your Articles of Organization, your LLC legally exists, and the compliance clock covered in Step 6 starts immediately.
Step 4: Get an EIN, Even Without an SSN
Most founders apply for an EIN online and get it in minutes. Founders without a Social Security Number or an Individual Taxpayer Identification Number (ITIN) can't use that tool, but the EIN itself is still free and still required to open a US bank account or file taxes.
Without an SSN or ITIN, you apply using Form SS-4 by phone, fax, or mail instead of online.
| Method | Who can use it | Typical speed |
|---|---|---|
| Online EIN application | SSN or ITIN holders | Minutes |
| Form SS-4 (phone, fax, or mail) | Founders without an SSN or ITIN | Same-day to several weeks |
The manual route's speed depends mostly on volume and whether the responsible-party details are filled in correctly the first time. A rejected submission means starting the wait over.
Step 5: File Form 5472 if the LLC Is Foreign-Owned
If your single-member LLC is 25% or more foreign-owned, the IRS requires an annual Form 5472 filing, even at zero revenue. This applies regardless of where in the US the LLC was formed.
- Filed with a pro forma Form 1120, a placeholder corporate return required alongside the 5472, even though the LLC owes no separate corporate tax.
- Reports transactions between the LLC and its foreign owner, such as capital contributions or payments for services.
- Due on the same schedule as your income tax return, with extensions typically available the same way.
Note: the IRS's stated minimum penalty for a late or missing Form 5472 is $25,000, per form, per year, whether or not the LLC made a dollar. A dormant California LLC with no activity still owes this filing.
Step 6: Handle California's Ongoing Compliance
This is where California diverges most from cheaper formation states. Three separate obligations run on three separate schedules, and missing any one of them can put your LLC out of good standing.
The $800 Minimum Annual Franchise Tax Never Goes Away
Every LLC "doing business" in California, or one whose Articles were simply accepted by the Secretary of State, owes an $800 minimum franchise tax every year. It's owed regardless of income, profit, or activity level.
The first-year exemption under AB 85 expired December 31, 2023. It only ever applied to LLCs organized between January 1, 2021 and December 31, 2023. Any LLC formed in 2024 or later, including one formed in 2026, owes the full $800 in its first year, with no waiver.
- First-year due date: the 15th day of the 4th month after formation.
- Every year after: due April 15.
- This is separate from income tax. California LLCs pass income, gains, losses, and credits through to members' personal returns, and the $800 franchise tax is levied on top of that, whether or not the LLC has any profit at all.
The Statement of Information Runs on Its Own Clock
Form LLC-12, the Statement of Information, files with the California Secretary of State rather than the tax agency, and it costs $20. It's due every two years, not annually.
- First filing: due within 90 days of formation.
- After that: due every two years during your LLC's anniversary month, with a filing window that opens six months before it's due.
- Late filing: a grace period of about 60 days applies before a penalty kicks in, commonly cited around $250, though we'd treat that specific figure as worth confirming directly with the Secretary of State.
A Gross-Receipts Fee Kicks In Above $250,000
LLCs with total California income of $250,000 or more owe an additional fee on top of the $800 franchise tax, tiered by income band from $900 to $11,790.
- Paid via Form 3536, an estimated payment due June 15.
- Reconciled on Form 568, the LLC's annual return.
- Applies on top of, not instead of, the $800 minimum franchise tax.
| Fee type | Amount | Due date | Filed with |
|---|---|---|---|
| Minimum franchise tax | $800 flat | 15th day of 4th month after formation (year one), then April 15 every year | Franchise Tax Board |
| Statement of Information | $20 | Within 90 days of formation, then every 2 years | Secretary of State |
| Gross-receipts LLC fee | $900 to $11,790 (tiered, income $250k+) | Estimate June 15 (Form 3536), reconciled on Form 568 | Franchise Tax Board |
An operating agreement isn't filed with the state, but it's still worth drafting. It backs up your liability protection by showing the LLC is genuinely run as a separate entity, not just a formality on paper.
Common Mistakes to Avoid
- Forming in Wyoming or Delaware to dodge the $800 tax: this mostly fails if you actually live or operate in California. "Doing business" is defined broadly, and a California resident running a Wyoming LLC from home generally still owes California's $800 tax and has to foreign-qualify there too, paying to register in a second state on top of it. This only avoids California tax with genuinely zero California nexus, no physical presence and no business conducted there at all.
- Treating the $800 tax as optional in a slow year: it's owed whether the LLC made money or not, and it doesn't scale down for a quiet year.
- Missing the Statement of Information's separate deadline: it's easy to assume the franchise tax payment covers everything, but the Secretary of State's filing runs on its own two-year clock.
- Assuming the EIN is the finish line: for a foreign-owned LLC, the EIN is closer to the start of an annual Form 5472 obligation than the end of the process.
- Using a home or friend's address as the agent for service of process: it exposes a personal address on public record and can put the LLC out of good standing if that person moves.
How FinStackk Helps
FinStackk is an accounting and tax compliance platform for U.S. businesses, helping you go from incorporation to ongoing accounting, tax, and compliance, all in one place.
We handle California LLC formation end to end through Fin-Start, including the Articles of Organization filing, agent for service of process, and EIN application.
Once your LLC exists, Fin-Tax tracks the $800 franchise tax, the Statement of Information, and the gross-receipts fee on a proactive deadline calendar instead of leaving you to track three separate schedules yourself. Book a free demo to see both in action.
FAQ
Does California still waive the $800 franchise tax in an LLC's first year?
No. That waiver came from AB 85 and only applied to LLCs organized between January 1, 2021 and December 31, 2023. It expired at the end of 2023. Any LLC formed in 2024 or later, including one formed in 2026, owes the full $800 minimum franchise tax in its first year, due the 15th day of the 4th month after formation.
Can I avoid California's $800 LLC tax by forming in Wyoming or Delaware instead?
Generally, no, if you actually live or operate in California. The state taxes any LLC "doing business" in California regardless of where it was formed, and that definition is broad. A California resident running an out-of-state LLC typically still owes the $800 tax and has to register as a foreign LLC in California, paying a second state's compliance costs on top. This only works with genuinely zero California nexus, no physical presence and no business conducted there.
What happens if I miss California's Statement of Information deadline?
The Statement of Information (Form LLC-12) is separate from the franchise tax and due within 90 days of formation, then every two years after. A grace period of roughly 60 days typically applies before a penalty, commonly cited around $250, can be assessed. Missing it repeatedly can also put the LLC out of good standing with the Secretary of State.