Exemption of $800 Minimum Annual Franchise Tax for California LLCs
For any LLC formed in California from 2021 through 2023, there is a one-year exemption from the $800 minimum annual franchise tax. Starting in the second taxable year, LLCs would pay the $800 minimum franchise tax until they formally dissolve. The purpose is to temporarily ease the burden of forming a new business in California.
California LLC Tax Information
- California Franchise Tax: LLCs in California pay an annual franchise tax to the state. The minimum franchise tax for LLCs is $800 per year. LLCs with income above certain thresholds pay additional taxes based on a graduated scale.
Self-Employment Taxes for LLC Members
LLC members who receive profits are generally self-employed for tax purposes and pay self-employment taxes on their share of the LLC’s profits.
How to Start an LLC in California FAQs
- Can I start an LLC online in California?
LLC vs. S Corporation Tax Considerations
LLC owners pay all income’s self-employment taxes, while S-corp owners may pay less depending on salary. LLCs have unlimited members, while S-corps are limited to 100 shareholders.
Importance of California LLC Compliance
- Starting a business in California requires filing articles of organization. This document serves as the official LLC form in California for $70. An LLC must file a biennial report to maintain its license.
Tax Payment and Dissolution Details for California LLCs
- Every LLC in California pays an $800 annual tax until canceled, including partial years. Use Web Pay for LLC tax payments. To dissolve an LLC, file Form LLC-4/7.
Penalties for Non-Payment of California LLC Tax
- If you don’t pay the $800 California LLC tax, you may face late fees, suspension, and loss of LLC status.
Additional Fees and Taxes for California LLCs
- LLCs must pay an additional fee based on gross receipts from California—called California total income, depending on income ranges.
Expedited Processing for California LLC Formation
Online filings take 5 business days, while hand-delivered documents processed in 3 days with a $15 counter drop-off fee. Expedited processing for 1-day is available for $350.
The Expense of California LLC Operation
Due to tax disadvantages, forming and operating a California LLC is an expensive endeavor. Pay attention to the $800 yearly charge and other financial obligations when establishing an LLC in California.