California LLC: Annual Franchise Tax ($800) | LLC University®

Last updated November 20, 2020

California LLC Annual Franchise Tax

How to form an LLC in California
This Quick Start Guide is a brief overview of how to form an LLC in California.

Detailed Lessons:

 

California LLC Costs:
California state fee: $70
Statement of information: $20 (every two years)
Annual franchise tax: $800 (every year)

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Hire a reliable service to form your California LLC:
Northwest ($39 + state fee) or LegalZoom ($149 + state fee)

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California LLC - Annual LLC Franchise Tax

Video Transcript:

The following information is provided for educational purposes only and in no way constitutes legal, tax, or financial advice. For legal, tax, or financial advice specific to your business needs, we encourage you to consult with a licensed attorney and/or CPA in your State. The following information is copyright protected. No part of this lesson may be redistributed, copied, modified or adapted without prior written consent of the author. California has a number of ongoing requirements for your LLC to remain in compliance with the State. The first of these is the Statement of Information which we discussed in a prior lesson. Remember your first Statement of Information is due within 90 days of the approval of your LLC. Then, you’ll need to file it again every two years. It will be due by the anniversary date of the approval of your LLC. If you have not watched this lesson yet, please do so now. The next requirement is the Annual LLC Franchise Tax of $800. California charges an $800 Annual LLC Franchise Tax on LLCs. This tax is due by all LLCs regardless of income or the business activity. This is a “prepay tax”, meaning that it pays for the current year. Your first $800 payment for the LLC Franchise Tax is due by 15th day of the 4th month after your LLC is filed. The month your LLC is filed counts as Month 1, regardless if you file on the 1st of the month, the last of the month, or any day of the month, really. This means that if you were to file your LLC on March 22nd, then you must pay the $800 fee no later than June 15th (in this example, March is Month 1, April is Month 2, May is Month 3, and June is Month 4). Then, every year after your first payment $800 LLC Franchise Tax will be due by April 15th. You pay the $800 LLC Franchise Tax using Form 3522 called the LLC Tax Voucher. We’ve included this form below in the download section, so that you can see it and get familiar with it. Failure to file before the deadline will result in the State charging late fees and penalties, and they will eventually dissolve your LLC if you do not pay the $800 Annual LLC Franchise Tax. This is not a popular requirement for California, but it is mandatory and it is the cost of doing business in the State. There’s no way to get around this tax. If you want to form an LLC in California, you have to pay this $800 tax within 4 months after you file your LLC and then again by April 15th of each year. Next is Form 3536, the Estimated Fee for LLCs. In addition to filing and paying the $800 Annual LLC Franchise Tax, you’ll also have to file a return called Form 3536, Estimated Fee for LLCs, and pay an additional fee only if your LLC will make $250,000 or more during the tax year. The more you make, the higher the fee. For example, again if you’re under $250,000 you don’t have to pay this additional fee, but if you’re between $250,000 – $500,000, the fee is $900. Between $500,000 and a million it’s $2,500, etcetera as you can look at the table there. Again, the fees above are in addition to the $800 Annual LLC Franchise Tax, and again you’ll only have to worry about this fee if you make over $250,000 during the tax year. Form 3536, again the Estimated Fee for LLCs must be filed and paid by the 15th day of the 6th month after your LLC is filed. Then, every year after your first payment, Form 3536 will be due by June 15th. If you make less than $250,000, again, you do not have to file form 3536. You’ll be able to download Form 3536 below this video, but we’re going to recommend that you get help with this as it’s quite complicated. We’ll cover more on this in just a minute. Next, Form 568, LLC Return of Income. In addition to paying the $800 Annual LLC Franchise Tax with Form 3522 (due by all LLCs) and filing and paying the Estimated Fee (for only LLCs with income over $250,000), all LLCs also need to file what’s called an LLC Return of Income, Form 568. Form 568 pays taxes on previous year’s income, just like regular federal taxes. Again, Form 568 is filed by all LLCs regardless of income. Form 568 is due by the 15th day of the 4th month after the end of your taxable year. This will most likely be April 15th if you run your tax year January to December (which a 99%of our members do). Think of Form 568 as a summary of all the LLC’s financial activity during a given tax year. The purpose of filing form 568 is to: report the Estimated Fee for your LLC, report the $800 Annual Franchise Tax, report and pay taxes for any members who are not California residents, report income, deductions, gains, losses cost of goods sold, salaries, and more. We’re also going to recommend that you get help from an accountant with Form 568 as this one is definitely confusing. It’s 7 pages long. Other Tax Requirements and Recommendations. Depending on your LLC’s income, how many members your LLC has, whether or not you have employees, what state the members are a resident of, and what type of business you have, you most likely need to file additional forms (besides what we have already mentioned), and you may also have to pay additional taxes to the state. Such tax documents might be a Schedule K-1, a Schedule EO, a Schedule D, and other documents. Calculating your LLC’s taxes can be complicated and if done improperly can negatively impact your LLC. We strongly recommend that you hire an accountant. Again, California taxes are very complicated. Hiring a tax professional will not only help keep your LLC in compliance with the State, but it will also give you an advisor to go to further business questions. Whether your business turns a profit or loses money, you still need to file tax documents every year. This is not something to be taken lightly. If you want to run a serious business and not get into trouble with the State, you should get assistance in filing your taxes properly. A referral from a friend or someone else you trust is usually the best way to find someone to do your taxes. You can also ask co-workers, acquaintances from local clubs or organizations, your neighbors and other business people. You can also ask your Twitter, Facebook, LinkedIn or other social media friends. It’s as easy as typing into your social media account, “Hey, I just form an LLC. Anyone know a good accountant?” If you can’t get a personal referral, then try doing a search online for “accountant” or “certified public accountant” and looking for someone with good reviews. Also, take a look below this video. We’ve included some good resources to help with your search. You should also want someone who’s a good fit for your company, makes you feel comfortable, and is willing to answer all of your questions. It should be someone you like personally as well as professionally. It’s okay to take your time to find the right person. We recommend talking with at least 2-3 people before making your final decision. A good thing to keep in mind is that these professionals are interested in your business. They’ll gladly give you 10-15 minutes (if not more) of their time, so don’t feel pressured to go with the first person that you talk to. And hey, if you really want to find a rock star tax professional, why not speak to 7 or 8 to make sure you really find the best one. We hope that you find a great tax professional. And that concludes this Lesson.

Form 3522:
“Limited Liability Company Tax Voucher”

• Form 3522 is used to pay the $800 Annual Franchise Tax each year.

• Download Form 3522: Visit the FTB Forms page. Click “Online”. Select the appropriate tax year. Select “Limited Liability Companies”. Click “Get Forms”. Look for Form 3522 and click the download link.

All LLCs in California must file Form 3522 and pay the $800 Annual Franchise Tax every year, regardless of revenue or activity. Said another way, there’s no way to avoid this fee.

• The first $800 payment is due the “15th day of the 4th month” after your LLC is approved. We know that sounds like 4.5 months after your LLC is approved, but it’s actually 3.5 months. For example, if your California LLC is approved in November, November is counted as “month 1”, so 4 “months” after that is February. And the 15th day would be February 15th.

• So for example, if your LLC is approved in November of 2018, then your first $800 payment will be due by February 15th, 2019. This $800 is paying for the 2018 tax year since the LLC existed from November to December. Then, just two months later, you’ll owe another $800 payment, due by April 15th, 2019. This 2nd $800 payment is “going forward”, paying for the 2019 tax year. That’s two back-to-back payments totaling $1,600.

• We’ve mentioned our future file date attachment (that can be filed with your Articles of Organization) throughout our California LLC lessons, but we’ll mention it again here… just in case you’re reading this before you’ve formed your LLC. So the back-to-back payments come into play if your LLC is approved late in the year (October, November, or December). The trick to pushing that 2nd $800 payment ahead – again if forming your LLC late in the year – is to give your LLC a future file date of January 1st. You can also just wait until the last week in December or sometime in January to submit your Articles of Organization to the state. Please note, if using a future file date, it can’t be more than 90 days ahead.

• So it’s really the 1st and 2nd payments which can be a little tricky to figure out. In summary, the first $800 is due 3.5 months after your LLC is approved. The 2nd $800 is due on April 15th. Then anytime April 15th rolls around again, you’ll owe another $800.

Form 3536:
“Estimated Fee for LLCs”

• Form 3536 is used to pay an Estimated Fee for your California LLC if it will make more than $250,000 in annual gross receipts (total revenue). If your LLC will not earn that much in annual gross receipts (total revenue), then you don’t need to file Form 3536.

• This fee is called “estimated” because you need to look over you LLC’s finances and see how much money has been made so far in the year. Then you need to forecast ahead and evaluate what your LLC’s annual gross receipts (total revenue) are likely to be.

• Download Form 3536: Visit the FTB Forms page. Click “Online”. Select the appropriate tax year. Select “Limited Liability Companies”. Click “Get Forms”. Look for Form 3536 and click the download link.

• This is first due by the “15th day of the 6th month” after your LLC is approved. As we learned earlier, although that sounds like 6.5 months after your LLC is approved, it’s really 5.5 months after your LLC is approved. For example, if your California LLC is approved in May of 2018, then May is “month 1”. And 6.5 months after that is October. And the 15th day would make that October 15th, 2018.

• After that first due date, any future Estimated Fees must be paid and filed by June 15th each year.

Form 568:
“Limited Liability Company Return of Income”

• All California LLCs must file Form 568, also known as a “Limited Liability Company Return of Income”.

• Form 568 is the state-level tax return for your LLC. And similar to your federal tax return with the IRS, which has “attachments” like forms and schedules, your LLC’s Form 568 will likely have California-specific schedules and forms attached to it as well.

• Download Form 568: Visit the FTB Forms page. Click “Online”. Select the appropriate tax year. Select “Limited Liability Companies”. Click “Get Forms”. Look for Form 568 and click the download link. Also download the “Booklet” for instructions and any applicable 568 schedules.

• Depending on how your LLC is taxed by the IRS, Form 568 will typically be due by March 15th or April 15th each year. We strongly recommend working with an accountant to make sure you file your taxes properly.

Finding a California Accountant

We strongly encourage you to work with an accountant and/or a tax attorney after you form an LLC in California. It’s also a good idea to speak with a few accountants before your LLC is even formed.

You see, unlike most states, where an LLC’s annual report is filed with the Secretary of State (and it’s a typical “fill-in-the-blank-and-update-your-contact-info” form), your California LLC’s “annual reports” are essentially tax filings (franchise tax, estimated fee, tax on income, and more) paid to the state’s tax authority, the Franchise Tax Board. Said another way, they are far more complicated!

So not only will an accountant help you file your federal, state, and local returns properly, but they’ll be available to discuss tax strategies, such as if and when it makes sense to have your LLC taxed as an S-Corp, among other things.

We have a strategy called “knights of the roundtable” which you can use to find and interview potential accountants. You can read about that here: how to find an accountant for your LLC.

California Franchise Tax Board Contact Info

Hours:
8:00am – 5:00pm, Monday to Friday (Pacific Time)

Phone:
800-852-5711

Wait times:
Wait times can be quite long if you call during the middle of the day. We recommend waking up early and calling them at 7:00 a.m.

FTB live chat:
https://www.ftb.ca.gov/help/contact/chat.html

FTB homepage:
https://www.ftb.ca.gov/

Matt Horwitz
Founder & Educator, LLC University®
Forming an LLC shouldn't be so complicated. Our step-by-step guide will make the process a breeze – and no complex legal jargon! LLC University® teaches people how to form an LLC for free in all 50 states. We hope you find our free guides and resources helpful in your business journey.

117 comments on “California Annual LLC Tax”

Disclaimer: Nothing on this page shall be interpreted as legal or tax advice. Rules and regulations vary by location. They also change over time and are specific to your situation. Furthermore, this comment section is provided so people can share their thoughts and experience. Please consult a licensed professional if you have legal or tax questions.

  1. I registered a INC company in the end of 2016 without any operation so far, do I have to pay any type of annual fee?

    Reply
      • I opened an LLC in 2014. I have not be active and will be dissolving. I did not pay my $800 for 2017 (because I am going to dissolve it). But I can’t remember if I paid it for 2016 which I did not have any activity either. How can I check if I paid that franchise tax. Is there an online record of my payments? How do I know if there are fee’s accumulating? Thx

        Reply
        • Hi Caryn, the best thing do to is call the California Franchise Tax Board and ask for a review of your account. They’ll let you know where the LLC stands. It’s best to call shortly after opening hours in order to avoid long wait times. Hope that helps.

          Reply
  2. My LLC was registered on 12/23/2016 but I didn’t start my consulting services until 1/9/2017. Do I need to file form 568 by April 15, 2017 and pay $800 fee and still pay another $800 for 2017 annual fee?

    Reply
    • Hey Homer, you just made it ;) You don’t have to pay an $800 fee for the 2016 tax year (therefore avoiding the dreaded “back-to-back” $800 Annual Franchise Tax payments). The reason why is that you fall within the “15-day rule“. Meaning, your LLC was formed between December 17th and December 31st. Said another way, your LLC’s tax year was 15 days or less.

      You just have to pay the 2017 $800 payment, which is due by April 15th, 2017. Please note, if your gross receipts are going to be over $250,000 for the 2017 tax year, you must also file and pay the Estimated Fee (Form 3536).

      As an FYI to others, if Homer’s LLCs was formed on December 5th, he would owe back-to-back payments. The first payment would be due the 15th day of the 4th month after the LLC is formed. December is “month 1”, so the $800 payment for 2016 would be due by March 15th. Then, just one month later, the $800 payment for 2017 would be due by April 15th.

      For this reason, if you’re thinking of forming a California LLC late in the year (October, November, December), you can either include a Future File Date Attachment (requesting a future file date of January 1st) or just wait until the last week in December or early January to submit your Articles of Organization to the state. This prevents you from paying the “back-to-back” $800 Annual Franchise Tax payments (a total of $1,600 paid very close together).

      Hope that helps, Homer! Let us know if you need anything else.

      Reply
      • Hello Matt,

        I just found your content on YouTube and am grateful for all of your guidance. I am looking to form a DIY LLC in CA and would like to have it start in Jan. 2018. How long should I expect the process to take? Should I start 60, 45, 30 days prior to the new year?
        Ideally I’m timing this to avoid the “back to back” mentioned in the question above.

        Thank you for your amazing service and value to the marketplace.

        Kristian…

        Reply
        • Hey Kristian, you’re very welcome. Thanks for the kind words! :-) Good call on waiting until 2018 to avoid the “back to back” $800 franchise tax payments ($1,600 total). Most states have a “delayed effective date” section in the Articles of Organization, but California doesn’t by default. However, you can request a future file date of January 1st 2018 via a Future File Date Attachment. Hope that helps!

          Reply
          • Hi Matt, Yes, this helps tremendously. Thank you for the quick reply and awesome service! You Rock!

            Reply
          • Hi Matt – FYI I requested an “effective date of 1/1/2018” on the cover letter of my Articles of Organization for my LLC that I sent in the last week of December 2017 and it was returned because you cannot request/require an effective date in California. I want to help others avoid that mistake! It cost me a few weeks in processing time having to file all over again after I got the declined form back.

            For LLCs making less than $250,000 annually, do you still file the Form 3536 – 2017 Estimated Fee for CA LLCs form to just say no, I didn’t make $250k?

            Thank you for this invaluable website!!

            Reply
            • Hey Christina, requesting a future file date via the Mail Submission Cover Sheet used to work (most LLC examiner’s accepted it), but that’s no longer the case. Instead, you’ll need to use a Future File Date Attachment, which should be filed along with the Articles of Organization (it then becomes a part of the Articles of Organization) to request a future file date of January 1st. And regarding Form 3536 (Estimated Fee for LLCs), no, this doesn’t need to be filed if your LLC is making less than $250,000 annually. Hope that helps!

              Reply
  3. Hello,
    My name is Ron, I have two question would like to ask from you if you have time to answer it.
    1) can I start an llc if have 100k in debt
    2) how much do you guys charge for “registered agents”
    Thank you

    Reply
    • Hi Ron, yes, you can start an LLC regardless of your personal financial situation. We don’t offer Registered Agent services ourselves, but we do have recommendations on our website. Thanks and hope that helps.

      Reply
  4. Hi sir
    I want to open a llc in California. Should i wait till january to save the franchise tax ?
    Because i read somewhere that first financial year we dont have to pay franchise tax. Is that true ?
    Please guide me should i go ahead by this month or should i wait till January ?
    Thanks

    Reply
      • This back to back Franchise tax is a pain. They should highlight this information on the official page while registering for LLC. It’s like a hidden trap in the name of Taxes.

        Reply
        • I hear you 100%. It really is confusing at first glance and the majority of people don’t even know about it. We will do the best job we can at warning people and offering recommendations (such as waiting until January, if possible) wherever we can. Thank you.

          Reply
  5. Hello,
    If I liquidate my California LLC by Dec. 31st of 2017 will I owe the $800 fee in 2018. I paid the $800 fee in April of 2017 for this year. I want to make sure I have enough funds in the LLC bank account for any tax liabilities next year. The LLC has no revenue in California. Thanks Matt.

    Reply
    • Hey Clayton, if your LLC is properly dissolved by the end of the year, you will not owe an $800 franchise tax payment for 2018. I recommend getting things done as soon as possible though, just so it’s not filed to close to the end of the year. The CA SOS is very busy and things can take a number of weeks.

      Reply
  6. If a single-person LLC is dissolved with unpaid franchise taxes outstanding, will that person be individually liable for the unpaid taxes?

    Reply
  7. Must an LLC submit filings and pay state taxes only to the state where it’s registered, or to the state where it physically operates?

    You suggest getting an LLC in one’s home state, but the thought of paying $800 minimum every year to the CA FTB parasites is sickening.

    Thanks for any advice!

    Reply
    • Answered my own question per the “Taxes are paid where money is made” slogan on your other pages.

      Reply
    • You most certainly need to file/pay taxes where the money is made. In your case, CA. If you also register the LLC, you’ll likely (but it depends) need to file a return in that state, and then apportion the income to CA. If you live and do business in CA, it’s really best to form there for various reasons. You can find more info on this topic here: doing business in California. Hope that helps.

      Reply
  8. Hi Matt,

    I want to form my LLC now but as you know we are at the end of the year so of course I will have to wait until January to form it so as not to pay the back to back fees. My question is, I need to have a business account opened asap so how can I get the business account now and while waiting to form the LLC in January?

    Reply
    • Hi Sheila, you can’t open an LLC business bank account unless the LLC is in existence (aka effective). If you want to file now, but have the LLC become effective on January 1st (to avoid the back-to-back franchise tax payments), you can use a Future File Date Attachment. Hope that helps!

      Reply
  9. Hey Matt,

    First off, thanks for the thorough information! I just filed an LLC in August 17 and paid the annual tax. Am I to correctly assume that the Form 568 isn’t due until January or February? Is there a way I could e-file this information or would I have to mail it in?

    Reply
    • Hey Kevin, you’re very welcome! If you operate on the calendar year of Jan. 1 to Dec. 31 (which most filers do), your LLC’s Form 568 will be due by either March 15th or April 15th, depending on how your LLC is taxed for U.S. federal tax purposes with the IRS. If your LLC is taxed like a Sole Proprietorship, it’s April 15th. If your LLC is taxed like a Partnership, it’s March 15th. And yes, you can e-file Form 568 online via CalFile. Hope that helps.

      Reply
  10. Hi Matt, I registered an LLC on October 20th, 2017 and have not started the operation yet. Is there any way to get exempt from $800 Franchise Tax for the first year in my case?
    Thank you!

    Reply
    • Hi Amit, no, unfortunately there is not. Your 2017 payment was due January 15th. And then you’ll need to pay for 2018 by April 15th.

      Reply
  11. Hi Matt,
    Thank you for all your very helpful information.
    I have a different scenario I would appreciate your thoughts on.
    On February 5, 2018 my LLC was registered with California SOS.
    About February 27, 2018 depending on the mail and how fast SOS processes the form, the LLC was dissolved, not having done any business.

    Will I still owe the $800 tax?
    If not, what form should I file?

    Thanks for your help.

    Reply
    • Hi Steve, I wish I could be more helpful, but I’m not 100% sure on this. I recommend contacting the CA Franchise Tax Board.

      Reply
      • Thank you Matt. I was able to get in touch with the FTB. They said if I dissolved with the SOS within a month of registration with the SOS there would be no tax due, but a return still has to be filed.

        Reply
        • Hi Steve, this is great news. Thanks for following back up and sharing the details. We greatly appreciate that and will keep this noted in case someone else asks. Cheers!

          Reply
  12. Hi Matt,
    We have closed our s corp in November 2017 and now filing final return this month 2018. Must we have to pay $800 with the final return?
    Thanks in advance for your reply!
    Chris

    Reply
    • Hi Christina, first, “closed an s-corp” is a bit ambiguous, so I’m not sure what you mean. An S-Corp is not a legal entity formed with the state, but instead a tax election made with the IRS that “sits on top of” either an LLC or a Corporation. So, if you formed an LLC or a Corporation with the California Secretary of State, did you dissolve the entity? And has the state returned approval of such in 2017? If so, then you don’t owe an $800 payment since a payment made in 2018 would effectively be paying for the 2018 tax year (which is not needed, since your entity – again, if properly dissolved with the Secretary of State – isn’t going to exist then). That is also assuming you made an $800 payment in April of 2017. Hope that helps.

      Reply
    • did you ever find out what to do? I dissolved mine in July 2017 and filing 2018 taxes now wondering if the $800 is required.

      Reply
      • Hi Joe, if you paid your $800 annual franchise in 2017, you most likely paid for the 2017 tax year (unless that payment was for the 2016 tax year for an LLC that was created late in 2016), however, I recommend calling the California Franchise Tax Board to review your account. I recommend calling early in the morning (shortly after they open) to avoid longer hold times. Hope that helps.

        Reply
  13. Hi,

    I am a Sole Member LLC filed on December 7th, 2017. I have just paid $800 annual tax and was going to pay another $800 for 2018 due by April 15th, when I read the article on “disregarded entity” for sole member llc..

    I filed all the expenses in my personal tax return. So, does it mean that I am not supposed to pay $800+$800?

    Please advise.

    How do people cancel payment made to IRS?..

    Thank you,
    Iryna.

    Reply
    • Hi Iryna, the $800 LLC Annual Franchise Tax is paid to the California Franchise Tax Board, not the IRS. Where did you send your payment of $800? It should have been sent to the California Franchise Tax Board along with Form 3522 (“Limited Liability Company Tax Voucher”). Since your LLC existed for 1 month in 2017, you owe an $800 payment for 2017, which was due by March 15th, 2018. This essentially “back paid”. The next paying is “going forward” paying for the 2018 tax year and that $800 was due April 15th, 2018. We recommend speaking with an accountant and the Franchise Tax Board to review your account and see if anything is due. And regarding the IRS, an overpayment can stay on the account as a credit or you can request it as a refund during next year’s tax return. Hope that helps.

      Reply
      • Matt, yes I meant Franchise Tax Board. I sent $800 before March 15th online. I read that disregarded entities (sole member llc) file everything in personal form. Why do I pay another $800 in 2018 not in 2019?..
        Do sole member llc file form 3522?

        Thank you very much,
        Iryna.

        Reply
        • Found this:
          Credit Card
          Use Discover, MasterCard, Visa or American Express Card to pay your
          business taxes. Go to officialpayments.com. Official Payments Corp.
          charges a convenience fee for using this service. If paying by credit card, do
          not file form FTB 3522.

          Reply
          • Hi Iryna, good find. Thank you. In regards to your question about “why do I pay another $800 in 2018, not in 2019?”, it’s because you owed $800 for 2017. That was due 3.5 months after the LLC was formed (by March 15th 2018). Then you pay the 2018 tax year by April 15th 2018. You had back-to-back payments because the LLC went into existence late in the year of 2017. It’s the 1st payment which is a “quirk”. Then every tax year is paid by April 15th. Hope that helps.

            Reply
  14. QUESTION 1. Can I use CalFile for filing FORM 568?
    QUESTION 2. If I file my Form 568 personally at the Franchise Tax Board FTB Office in Sacramento and pay the $800 Annual Tax at the same time, what will the registered date of filing be?

    The reason I asked question 2 is because last year I prepaid (via Official Payments) $800 Annual Tax weeks ahead and filed /mailed Form 568 which was signed received by FTB weeks ahead of the deadline YET, I was considered late by FTB declaring that said form was not recorded in their database which even if it was their fault was blamed on me by declaring my submission late. I then appeared personally to file an exact copy of form 568 YET, I was still considered late because according to them it is not yet inputted in their database. FTB then kept charging me late fee and on my records show a fee above $300 over and above the early payment of $800. Do I smell a big fat scam on this case blaming the filer for FTB gross incompetence and inefficiency by charging them late fee because their database office is late on RECORDING returns mailed to their office?

    Reply
    • Hi Maria, I’m not sure regarding CalFile. Please call the California Franchise Tax Board to double-check. It sounds like you’re trying to pay an $800 annual franchise tax for an LLC that does not yet exist. Did you form an LLC?

      Reply
  15. Hi Matt, First of all great site and great information, thank you!
    I created an LLC in CA in Oct 2016 and (wrongly) assumed that I will only need to file for taxes for 2017. I have not yet started business and so the LLC only exists on paper. I am the only owner / member of this LLC.

    So now it seems I have to file taxes for year 2016 and 2017.

    I am confused between Form 568 and Form 3522. Do I have to file both?
    Is the $800 tax paid with each form and for each year?
    If so will there be a $800+$800 = $1600 taxes for each year (2016 and 2017)?
    How will it look in 2018?
    Is there likely to be any penalty due to any late payments?

    Sorry, but this seems very confusing and the information about these forms do not refer to each other.

    thanks a lot in advance.

    Reply
    • Hey Neena, short answer is to work with an accountant and get your FTB account in good standing. You can also call the FTB for full details. Yes, there are likely penalties and interest. Please check this page again as we just made some updates a few days ago to better explain things. You will own an $800 franchise tax payment for 2016, 2017, and 2018 (Form 3522 is used for this). Form 568 was due April 2017 (paying for 2016) and April 2018 (paying for 2017). Hope that helps.

      Reply
  16. I started LLC in 2015. Paid all the 800 annual fees up to now but did not file any of the 568 forms
    By mistake. Now that I know it has to be done I am presently getting it done. What
    Are my consequences for late filings. I shouldn’t owe any tax .

    Reply
    • Hi John, while you may owe $0 tax, the 568 filings are still required. This is often referred to as an “informational return” or “zeroed out return”. However, your LLC will be subject to a late-filing penalty. You can either call the Franchise Tax Board to figure out the total amount owed, or you can file your 568 Returns and then wait for the bill from the Franchise Tax Board. Hope that helps.

      Reply
  17. I have a LLC in California that operates as a disregarded entity (sch c)
    The amount reported on schedule IW line 1a: Is it gross receipts? Or net profit? If net profit, can I subtract SEP contributions and SE health insurance from the amount reported? Worst instructions I’ve ever seen.

    Reply
    • Hi Glenn, I hear your frustrations. However, we don’t offer any information on how to complete tax forms. For this, you would need to speak with an accountant. Thanks for your understanding.

      Reply
  18. Hi Matt,

    Your website has been a tremendous source of information. Thank you for all the great work!
    I have a few questions and would be grateful if you could provide some insight. I wanted to know if it is possible to add LLC members to a single member LLC once it has been formed i.e. Articles of Organization has been approved and Statement of Information Form has been submitted. The LLC also has an EIN already. If yes, what is the procedure?
    Also, I understand that California is considered a ‘community property state’, so if an LLC is wholly owned by a husband and wife, it can be treated as a disregarded entity for tax purposes. Now if the single member LLC is owned by the husband and he wants to add his wife to the LLC, does he need to obtain a new EIN for the LLC? Does the IRS need to be informed about this member addition? Will the LLC now be considered a ‘partnership’ for tax purposes?

    Thanks for your help.

    Regards

    Reply
    • Hi Sarah, you’re very welcome! Thanks for the kind words :) We have info on husband + wife LLCs in community property states here: Qualified Joint Venture LLC. You’ll need to sign an Operating Agreement and make it owned by one “person”, written as “John and Mary Doe, 100%” or “John and Mary Doe, married couple”. You’ll need to send a letter to the IRS and let them know you’d like for the husband and wife LLC to be taxed as a Sole Proprietorship. Hope that helps.

      Reply
  19. Hey guys!
    Quick question, when paying $800 for “Form 3522” should I use my business bank account or is my personal bank account fine to use.
    I am the only member of the LLC.

    Thanks

    Reply
  20. Hi, at approximately what income threshold does it make sense to change from a simple Sole Proprietor to the more complex Single Member LLC (& maybe file as an S-Corp) just to save on self-employment or other income taxes?

    Sole is so simple and LLC requires more time, efforts & money including the infamous 800 in CA taxes, etc.. so it’s not worth the trouble if I’m not going to save a bunch. (I realize another reason to be an LLC is the limited liability & more pro business sounding name, etc.. but I have no assets & rent so can’t see being sued for my design services business.) THX for any insights!!!!

    Reply
  21. Dear Matt,

    Thank you for the valuable articles that help us a lot. My restaurant will not be opened until August 2019. To avoid $800 annual franchise tax, I understand that I shouldn’t register my LLC until January 1, 2019.

    However, to be able to sign a lease in November 2018, I feel like it’s better to have a LLC company. But I do not want to pay $800 tax. I think I will sign a lease with a LLC and with Future File Date Attachment, so my LLC will not formed until next January 2019. Do you think it okay?

    Thank you

    Reply
    • Hey Quynh, I think you’ll be fine waiting until January to form the LLC but signing the lease in November. I wouldn’t attach your Future File Date Attachment to the lease (if that’s what you meant). It could just confuse the leasor. It’s good practice to sign the lease as “ABC Company, LLC and/or their assigns”. This way if you for some reason, ABC Company, LLC got rejected when you filed it, and you then had to file under a different name, you could just assign the lease to the new LLC. Although you never really had authority to sign on behalf of ABC Company, LLC, the leasor likely won’t care (or care to look) – they’re more concerned about making sure they get their money. Hope that helps.

      Reply
      • Thank you very much for your quick answer.

        It helps very much. First, I will file name reservation request to secure the name for 60 days. After that, I will sign a lease with “Quynh, llc”. In January, Once my llc company is approved, My “Quynh, llc” is still the same as the name I signed on lease.

        What do you think?

        Thank you so much for your time.

        Reply
        • I like this a lot actually. It’s better than what I first suggested. Good thinking!

          Reply
  22. Hi Matt, I registered my LLC in January 2018 and have not made any sales yet, just made purchases from other vendors. If I dissolve the LLC before the end of this year, will I still owe the $800 fee? Alternatively, I do wish to keep the LLC, but put it on “hold” if you will as I will be doing a different business – is this possible to avoid continuous payments of the $800 fee? Thanks in advance!

    Reply
  23. I filed me LLC in July 5 2018 and my franchise tax is due Oct 15 2018 correct ?
    Also I don’t have enough money to cover this as I’m barely getting my business together as a I have a full time job. What can I do to get this waived or postponed to a later date , once I get more income ?

    Reply
  24. Hi Matt,

    Thank you for you useful articles. I have a question about the LLC fee. I registered my LLC on Sep 21, 2018 and would like to dissolve it on October 19, 2018. Do I still need to pay $800 fee?

    Thank you for your reply in advance.

    Reply
    • Hi Siri, you will need to call the California Franchise Tax Board to check on this. Thanks.

      Reply
  25. I think I might know the answer to this but wanted to put it here for clarification as I have been searching and wanted some clarity.

    My situation:
    1. I am filing for a new LLC in CA with a future date attachment of Dec 18. This falls under the 15day rule ( I will not be doing business until Jan, 1 2019) so I will not pay the back-to-back $800 and will submit the $800 Annual Tax with a Form 3522 on (or before) Apr 15 2019
    2. I will not make more than $250,000 so don’t need the Form 3536
    3. Do I file Form 568 on/before Apr 15 2019 or not until Apr 15 2020? I am assuming the 568 gets filed in 2020 to cover 2019 as it is not an estimated/pre year thing like 3522 but looking back on the year like standard personal taxes?

    Reply
    • Hi Eric, you are correct on all:
      1. Correct. Your first $800 annual franchise tax (paying for the 2019 tax year) will be due on or before April 15th, 2019.
      2. Correct. No need to file the Estimated Fee for LLCs.
      3. Your first taxable year will be 2019, so Form 568 isn’t due until April 15th, 2020.
      Hope that helps!

      Reply
  26. Hi Matt,
    If my California LLC is activated on December 18th of 2018 will I be avoiding the back to back fees?

    Reply
    • Hi Nawar, yes, you will be avoiding them since your LLC will be taking advantage of the 15-day rule. Meaning, since your tax year will be 15 days or less, you don’t owe an $800 franchise tax payment for 2018. Your 2019 payment will be due by April 15th. Hope that helps.

      Reply
  27. i have my LLc corporation from 2010 i did not pay the $800 for the year 2016 2017 2018 .how can i void the penalty OR decrease the amount owed. No business activity was made from 2016-2017, I’m trying to avoid the $800 or the penalty only

    Reply
    • Hi Robert, you’ll need to contact the California Franchise Tax Board and/or a tax attorney for assistance.

      Reply
  28. Hi Matt,
    Thank you for such a detailed and clear explanation of the LLC forms.
    I am still confused about the period beginning and end dates. Is the beginning date the day I filed? or is it when I started the business? I filed the LLC 8/30/18 and opened the shopify-online store on 9/28/18.

    Thank you for your wisdom!

    Reply
    • Hi Christina, you’re welcome. The LLC effective date is not the date you opened your online store. It’s the date that’s stamped on your Articles of Organization or found when you do a California LLC name search on the state’s website. Hope that helps.

      Reply
  29. Hi Matt,

    I have a LLC formed out of state, as it correct that I still have to pay the annual $800 fee to California Tax Board? Is it because my principal office is set up in California? IT seems that I am then a registered LLC in two states and whats the point of that?

    Reply
    • Hi Tica, if you’re doing business in California, then yes, the franchise tax needs to paid and the LLC should be registered as a foreign LLC. If you reside and do business in California, it’s best to form an LLC there and not in another state. Hope that helps.

      Reply
  30. Hi Matt,
    Great site! I have a question for you. I would like to dissolve my LLC. I am the sole owner. I know I need to file Form LLC-4/7. I will likely mail it today (12/27/18) but by the time it is processed with the Secretary of State’s office, it will most likely be the first week in January. Will this mean I will be responsible for the 2019 annual $800 tax fee? Also, do I need to submit any dissolution forms to the IRS?
    Thank you!

    Reply
    • Hi Jodi, thank you! If your LLC dissolution is received by January 15th (stamped for filing), then you will not owe $800 franchise tax for 2019. We recommend speaking with an accountant regarding any final returns. Hope that helps.

      Reply
  31. Awsome information Matt and super helpful , I have a question of my own so I got these 2 documents from legal zoom that I don’t fully understand. Both of these forms state that inhve to pay a $800 fee. California Limited Liability Company Return of Income – SMLLCs owned by individuals or C corporations. And this 2nd one as well. California Limited Liability Company Return of Income – LLCs classified as partnerships/SMLLCs owned by pass-through entities. I don’t know if these 2 forms are related to the FTB3522 form. What I do t get is why are both forms saying that I have to pay $800 fees each plus $800 for the 3522 form. Hopefully you can help.

    Reply
    • Hi Ozy, thank you. Glad to hear that :) The $800 annual franchise tax is paid and filed along with Form 3522. The “California Limited Liability Company Return of Income” is also known as Form 568, which is briefly discussed on this page. But you don’t pay $800 again via Form 568. The $800 is reported on Form 568 though. Hope that helps.

      Reply
  32. If I create my LLC in March, will the $800 fee be due in June 19 and and then again in April 2020

    Reply
    • Hi Lisa, if your California LLC was formed in March of 2019, then your 2019 $800 payment is due by June 15th 2019. Then it will be due by April 15th in 2020, and every year thereafter. Hope that helps.

      Reply
  33. Hi Matt,

    I missed to file form 3522 for 2018. I’m a bit confused with filling in the form for “For calendar year 2018 or fiscal year beginning (mm/dd/yyyy), and ending (mm/dd/yyyy).

    Since I filed on May 02, 2018. 4 months would be August 15, 2018 but what should I write for my ending (mm/dd/yyyy)?

    And for 2019, what’s my date “For calendar year 2019 or fiscal year beginning (mm/dd/yyyy), and ending (mm/dd/yyyy).

    Thanks a lot!

    Reply
    • Hi Nadiana, first, you’ll want to call the California Franchise Tax Board to figure out the total amount due. They likely charged an underpayment penalty plus monthly interest, in addition to the $800. It may be something like $40-70 extra.

      For the 2018 tax year, your beginning date would be the date your LLC was approved by the California Secretary of State. You can find that date by looking at your stamped and approved Articles of Organization (it’ll be the “filed” date) or by doing a California LLC name search and looking for the “registration date”. If your LLC was approved on May 2nd, 2018, then that would be the date you enter after “For calendar year 2018 or fiscal year beginning (mm/dd/yyyy)“. You would then enter 12/31/2018 after “and ending (mm/dd/yyyy)“.

      Also keep in mind that your $800 payment for the 2019 tax year is due by April 15th, 2019. The beginning date for that voucher will be 01/01/2019. The ending date will be 12/31/2019. In 2020, it would be 01/01/2020 to 12/31/2020, and so on. Hope that helps!

      Reply
    • Hi Sandra, yes, this is a franchise tax, not an income tax. Meaning, the $800 annual franchise tax (and Form 568) must be filed every year in order to keep your California LLC in good standing (regardless of income, loss, or activity). Unfortunately, it’s the “cost of doing business” in California. Hope that helps.

      Reply
  34. Hi Matt,

    First of, thanks for your articles and all your help throughout when creating an LLC.

    Second, I used your instructions on getting EIN as a foreign national and just received the number via Fax from the IRS, I used an on-line fax service (paid $5.95 for a month) and received the EIN within 2 weeks.

    Third, you’ve asked me to share my experience as a non-US resident trying to get EIN, I was not sure if the IRS granted EIN to the non-legal aliens, it turns out your legal status doesn’t really matter, they are only interested in collecting Tax money, not deporting you :)

    Now, my question is this: I’m ready to pay that $800 annual California franchise tax before April 15th 2019, but I’m not clear on whether I have to also fill out and send the 568 form together with the 3522 form when sending this $800 payment to the franchise tax board. If they need to be mailed together then I have to hire an accountant to help me with filing the 568 form, because it looks really complicated for my knowledge.

    (Just a side note, and not sure if it matters, but I created this LLC for my independent feature film, not for a business, the film hasn’t earned any money yet, but it might make money in 2019).

    Looking forward to getting your response soon.

    Appreciate all you do!!

    Reply
    • Hi Diana, you’re very welcome! “They are only interested in collecting tax money, not deporting you.” That is very well said! What date was your California LLC approved? This date can be found by looking at your approved LLC Articles of Organization or by doing a California LLC name search. Unfortunately, the California $800 tax is a franchise tax, not an income tax. So it doesn’t matter if you make $0 or lose money. It also doesn’t matter if there is zero activity… the LLC must pay $800 each year to remain in good standing, as well as file Form 568.

      Reply
      • Ah, sorry Matt. I forgot to include that. My LLC was approved on January 4th 2019.

        Thanks!

        Reply
        • Okay, great. I wanted to know if your LLC was approved in 2018, because that would have changed my response. The short answer to your question is that the forms are not filed together, but the $800 is reported on Form 568.

          Your first $800 payment is due by April 15th 2019. You can submit the payment online or by mail with Form 3522 (the payment voucher). This will then be due every year going forward, also due by April 15th.

          Form 3536 and an LLC Estimated Fee only need to be filed if gross receipts are greater than $250,000. For most people, if applicable, this is due by June 15th. If gross receipts are less than $250,000, then Form 3536 doesn’t need to be filed.

          Form 568 isn’t due until after the closing of the 2019 tax year, so either March or April of 2020 is when it will be due. The due date depends on how the LLC is taxed and who owns the LLC. Generally speaking, Single-Member California LLCs have a due date of April 15th and Multi-Member California LLCs have a due date of March 15th. Form 568 is a California tax return (and may require additional attachments), so it’s best practice to work with an accountant.

          Additionally, as a nonresident of California, there are additional forms/returns you most likely need to file. You’ll want to speak with an accountant about all of this as there are details involved and this is just an overview. You most likely need to file a Form 540NR and a Schedule T (as a part of Form 568). If your LLC has other nonresident members, each will need to sign Form 3832 and submit it with the LLC’s Form 568. Form 592 (withholding statement) may be needed if there are multiple non-resident members. If there is just one nonresident owner in your LLC, Form 3832 is not needed. Hope that helps.

          Reply
    • Thanks for the quick reply Matt.

      Maybe I was not that clear in my inquiry: I do understand I need to pay $800, but I was just not sure if I have to send the 568 form together with this tax fee or does it need to be filed separately? I.e. are they interconnected and dependent on each other or $800 tax fee and form 568 are two separate filings?

      Thanks again!

      Reply
      • Hi Diana, I apologize. I could have been more clear when I asked the question. I’ll need to know the date your LLC was approved in order to best explain it. Certain things are paid for the current year, while other things are filed for the prior year. It becomes a little bit like a riddle. However, if I know the exact date the CA Secretary of State approved your LLC, I can explain in a non-riddle way :)

        Reply
  35. Hi Matt,

    I open LLC company in California in April 2019. I know that I need to pay $800 taxes by July 15,2019.
    I was wondering what will happen if I don’t pay and pay next year for 2019 and 2020. Is there are any penalties? Can be done or not?
    Since I done have any income still and trying to figure out way to buy more time.

    Thank you in advance for your time. I will really appreciate if you can help me.

    Best,
    Borislava

    Reply
    • Hi Borislava, yes, there are penalties. There is a late fee as well as ongoing interest. Unfortunately, this isn’t an income tax, it’s a franchise tax. Meaning, it’s owed whether an LLC makes money, makes no money, or loses money. If your LLC is past due, it’s best to call the Franchise Tax Board in order to determine the total amount due. Hope that helps.

      Reply
  36. Thank you so much for sharing this information! Genuinely so grateful for your service, this summary is straight to the point and extremely helpful.

    Reply
  37. Good day, thank you for all this wonderful information. Do you recommend getting LLC when the website is free? My website is free at this moment, so should I still get LLC to protect myself?

    Reply
    • Hi Oscar, it’s a balance of do you want to spend the money with do you think there is liability risk. California LLCs are more expensive than most states on an annual basis ($800 per year) and require a state tax return to be filed with the California Franchise Tax Board. However, if you feel there is risk in what you do, those costs may not be a big deal. Hope that helps.

      Reply
  38. In the process of dissolving my LLC now. Because the dissolution will be complete prior to the date the franchise tax is due for 2020 will I not need to pay it? Thanks.

    Reply
    • Hi Rick, unfortunately, since the LLC existed during the 2020 tax year, it owes franchise tax for that year. In order to close out the account and get the “final bill”, you’ll want to call the California Franchise Tax Board. Crappy rule, I know. Hope that helps.

      Reply
  39. I have filed an LLC in November and the it was formed in November 2019. So does that mean that I have to pay the back to back payment of $800 on February 15, 2020 and on April 15, 2020? My other question is can we pay the FTB fee online?

    Reply
    • Hi Rosa, yes, you owe an $800 for the 2019 tax year. That is due by February 15th 2020. And then your $800 payment for for 2020 tax year is due by April 15th 2020. You can pay the Annual Tax online via a bank account or credit card: California Franchise Tax Board: Make a payment. You’ll also need to file a 2019 Form 568 due by March 15th or April 15th, depending on how your California LLC is taxed. Hope that helps.

      Reply
  40. Hi There,

    My Llc was approved August 2020. I just found out about the back to back $800 payments (Northwest Reg Agents forgot to mention that). If I dissolve the Llc, before Nov.15th, will I still have to pay the California $800 FT fee? Thanks in advance!

    Reply
    • Hi Printina, yes, the LLC still owes an $800 payment because it existed for more than 15 days. The LLC will also need to file Form 568 in April 2021. I hope that helps and apologies for the crappy news :)

      Reply
  41. I just submitted to form an LLC a few days ago, got the success letter today – and then ran across your blog. Very informative (I just spent 45 minutes here reading all the comments too).

    1. I wish I knew about the back-to-back tax situation. No one mentioned it when filing (I guess their goal is just to file as much as possible). ALSO, I’m not sure how true, but 2021, CA will not require CA Franchise Payments for first year.

    What are my steps I can do to avoid the $800 back to back right now? Or even save $1600 ($800 now and $800 next year if I re-file in January).

    2. Will I be able to keep the same name? Or will it be “taken”

    Thank you so much for your response.

    Reply
    • Hey Vit, wow, thanks for taking the time to read through the site (and the comments) so extensively! And don’t worry, we’ve got you covered.

      Yes, Assembly Bill 85 was signed into law already. It amended Sections 17935, 17941, and 17948 of the California Revenue and Taxation Code. Don’t worry, you don’t need to remember that ;) LLCs that go into existence on or after January 1st, 2021 don’t have to pay their 1st year’s $800 franchise tax payment. Assembly Bill 85 eliminates the back-to-back payment issue and it also pushes the due date for the first $800 payment to April 15th, 2022. We’ve covered Assembly Bill 85 here: California LLCs don’t pay 1st year $800 franchise tax beginning 2021.

      You can cancel the LLC you just filed. Don’t do so by mail, since it won’t be dated within the proper timeframe. However, you can file the LLC Cancellation online via BizFile. Select “LLC Termination” and then answer the questions and follow the prompts. The system will guide you into the cancellation filing.

      Then you can wait until January 1st, 2021 to file the new LLC. Alternatively, you can re-file it now, but use a “future file date” (aka LLC effective date) of January 1st, 2021. This just means you file the LLC’s Articles of Organization now, but the new LLC won’t go into existence until 2021 (therefore taking advantage of Assembly Bill 85).

      Whether or not the LLC name will be available, we are not 100% sure. There’s a good chance it’ll be available since the original LLC was cancelled. However, if you have any issues after resubmitting your LLC filing (file the cancellation first though), just reply back here and our team will give you a hand. Did you get an EIN for the newly formed LLC?

      Reply
      • Thank you for the response.

        So you would recommend canceling it (Terminating it) and doing it again. Am I correct that I’ll basically save $1600 ($800 that I don’t have to pay in Feb 2021 and $800 that I won’t have to pay in April 2021)?

        I’ll just have to pay the filing fee again.. right?

        I have created a new EIN for the newly formed LLC, but I called them today, they don’t really see an issue as long as the name stays the same. I can send them a SS-4 form to update the formation date, but even if I didn’t do that, it should be fine (this is based on how I understood that conversation).

        I did pay a company to file my LLC… and I have the documents, can I just file them myself now?

        I’m following the steps to terminate, and it can’t find my entity. Does it take time to update on their end?

        Reply
        • Hi Vit, yes, you understand correctly. By filing and paying for the termination (and the new LLC), you avoid paying $800 in February 2021 and $800 in April 2021. If you search your LLC name on the state’s website (linked on this page: California LLC name search) does it show up? Yes, you are correct about the EIN being fine if the LLC name is the same. And yes, you can file these documents yourself if you want or you can hire a company.

          Reply
          • I search for my LLC name and nothing shows up.

            When I go here https://bebizfile.sos.ca.gov/Certification/Index and enter my Verification Number that I find on the LLC Registration – Articles of Organization that is signed by the secretary of sate – I see my listing there with todays date (11/20) as the “date issued.”

            However, I do see this right below “To view free PDF images of this filing and other filings, visit BusinessSearch.sos.ca.gov. The image of this filing will be available within 24-48 hours of the date the filing was approved.”

            So maybe I need to wait? I assuming I should get this moving as fast as possible so I don’t run out of the 15 day mark…

            Reply
  42. So it looks like I had to wait. The LLC is showing up now in the business search.

    I will go ahead and cancel it (I will actually call the CA Franchise Tax board and see what they advise me), and then simply refile in January. I just hope my name will be available!

    Reply

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