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We’re going to show you how to avoid back-to-back $800 franchise tax ($1,600 total).
The basics:
Every California LLC, regardless of their revenue or business activity, must pay an $800 Annual Franchise Tax every year.
And lets get this out of the way before we begin:
This article isn’t about how to avoid Annual Franchise Tax for California LLCs. In fact, you can’t avoid the Annual Franchise Tax in California. If you don’t pay this tax, the CA Franchise Tax Board will impose penalties and fines. See section 17942 of the Revenue & Tax Code, FTB penalty chart, and FTB penalties and fees.
Furthermore, if you think forming your LLC out of state is going to help you, you’re in for a surprise. If you’re doing business in California, which includes something as simple as making a phone call, then you owe this Annual Franchise Tax even if you form your LLC out of state. Worse, you’ll then be required to register your out-of-state LLC as a foreign LLC in California, effectively doubling your LLC filing fees as well as annual report fees. Point being, form your LLC in California and pay their fees. It’s the cost of doing business in California.
Okay, back to the article: so how do you avoid the “back-to-back” Annual Franchise Tax?
We first have to figure out when your 1st and 2nd payments are due. The state’s terminology sounds like a riddle.
(The 3rd payment and every year going forward is easy to understand.)
The instructions on Form 3522 (Limited Liability Company Tax Voucher) say:
Your first LLC annual franchise tax payment is due the 15th day of the 4th month after your California LLC is approved. The succeeding annual franchise tax payments are then due by April 15th every year.
That language is confusing. It sounds like the $800 is due 4.5 months after your LLC is approved. However, the $800 is actually due 3.5 months after your LLC is approved.
Here’s how it works:
As an example, if your California LLC was approved in November (on any day) of 2020, November is counted as “month 1”. So the “4th month” after that is February of 2021 (not March, which is what most people think). And the 15th day would make your first $800 payment due by February 15th, 2021.
And although your LLC existed for only 2 months in 2020 (November – December), it is considered to have existed for the entire taxable year (all 12 months of 2020).
This means your LLC has to pay the entire $800 franchise tax for the year 2020. An no, unfortunately, California doesn’t let you prorate it.
So your first $800 payment is due by February 15th 2021. We’ve established that.
Here’s where things get worse:
Your 2nd $800 payment is due just 2 short months ahead, by April 15th, 2021 (this is the payment for the 2021 tax year).
Within a 60-day period, you’re required to pay the state $1,600.
How to avoid paying $1,600 franchise tax (use a future file date)
Tip: The best way to avoid paying back-to-back $800 franchise tax is to not let your California LLC go into existence at the end of the year.
For example, if you’re forming your LLC later in the year (October, November, or December), and you don’t need your LLC open right away, you can use a future file date and make your LLC effective January of the following year.
This way, you’ll only need to make a single $800 payment. If your LLC goes into existence in January, January is “month 1”, and the payment is due by April 15th.
How to use a Future File Date for your California LLC
Most states refer to this as your LLC effective date, however, California used the term “future file date”. They both mean the same thing.
There are 3 ways to use a future file date. It depends on how you’re forming your LLC:
1. If you’re forming your LLC online, you’ll see a “File Date” section. This is where you’d select January. Note, the date can’t be more than 90 days ahead.
2. If you’re forming your LLC by mail, there are two methods:
a. wait until January to file (or the 2nd half of December because of the “15-day rule”)
b. use a Future File Date Attachment and include it with your Articles of Organization
The 15-day rule: California has a 15-day rule. If your LLC goes into existence in the last 15 days of December, it’s considered to not exist for that taxable year and therefore you don’t owe an $800 for those 15 days.
Note: If you find information online stating that you can forward your California LLC filing via the Mail Submission Cover Sheet (the first page in Articles of Organization), that is incorrect.
LLC University® recommendation
We recommend the online filing as it’s easier to complete and the approval time is slightly faster.
We have instructions for both the online filing and the mail filing here: California LLC filing instructions.
In Summary
If you’re thinking of forming a California LLC at the end of the year, and you don’t need your LLC open right away, we recommend forward dating your LLC to January 1st of the following year.
Or you can also just wait until January to form your LLC.
Either way, you’ll save $800.
References
California FTB: Common penalties and fees
California FTB: Doing business in California
California FTB: FTB 1024 Penalty Reference Chart
California FTB: Help with doing business in California
LLC University: Is my LLC doing business in California
California Revenue & Tax Code 23153: Tax on General Corporations
California Revenue & Tax Code 17941: Tax and Fees on Limited Liability Companies
California Revenue & Tax Code 17942: Tax and Fees on Limited Liability Companies
Matt holds a Bachelor's Degree in business from Drexel University with a concentration in business law. He performs extensive research and analysis to convert state laws into simple instructions anyone can follow to form their LLC - all for free! Read more about Matt Horwitz and LLC University.
HI Matt,
I cancelled my LLC in California in May of 2020 and had already paid my $800 fee a month before, in April 2020. Now that I am filing my Final tax return (along with my regular tax returns), April 2021, I noticed the Form 568 still says there is an $800 fee due, even though I already paid in in April of 2020. LLC cancelled May of 2020. How to I alert the Franchise Tax Board that I already paid the fee. I plan to file electronically and not sure how to bring that to their attention since I am filing electronically and have no way to add that comment in there. Do they automatically do a check to see if I already paid it? I don’t want any late notices arriving. Thanks.
Hi Juanita, we recommend checking with an accountant as we don’t specialize in filing returns, however, as I understand it, you simply report that the $800 was paid in Form 568. Exactly where and how though, I’m not sure. Thank you for your understanding.
HI Matt,
Thank you – you are correct – I just finished my Form 568 and there is a line that says to mark X if $800 fee was paid via 3522, and then brings the payment due to $0.
Thank you!
Hi Juanita, wonderful! I’m glad you found it and got the form completed.
Just started my LLC on Feb. 9th 2021. My understanding is under the new rule the $800 franchise tax isn’t due until April 2022. My question is, if I decided to dissolve my LLC before the end of 2021 will I still owe the $800 franchise tax for April 2022. Thanks in advance.
Hi Michael, great question. If your LLC is cancelled (cancelled, not dissolved) in 2021, then no, there is no payment needed in April 2022. That is because the April 2022 payment would be for the 2022 tax year. Hope that helps.
Hi Matt,
I formed LLC on 3/6/2020 and received the certification of status on April 24,2020 but did no business still till this date 2/8/2020. I was wondering if I should file Short form cancellation to waive potential $800. I didn’t pay for the annual tax for 2020 as well. Lost on what I should do, if continue to pay annual tax and most likely incur penalties on top. I also didn’t file 2020 tax due to not having any income for the LLC.
Currently on hold with FTB for 1 hr and still waiting.
Thank you for answering all these q’s! Appreciate it
I meant to say I filed individual tax for sole proprietorship in 2020. I was trying to transfer from sole proprietorship to LLC.
Thank you again!
Hi Diana, your LLC owes franchise tax for 2020 and 2021. And owes Form 568. Both are due even if you cancel the LLC. I recommend working with an accountant to get everything filed properly. If you make more calls to the FTB, call right at 8:00am. Hope that helps.
Hi Matt, happy new year. I just formed my LLC, registration date is showing 2/1/21. Since the passing of the AB 85 bill, I don’t need to pay the $800 tax board fee this year. Will I need to pay the April fee for 2022? It’s not really too clear on the website for California. Thank you!
Hi Ashley, because of Assembly Bill 85, your LLC won’t pay an $800 franchise tax for 2021. The LLCs first $800 franchise tax payment will be due by April 15th, 2022. Hope that helps :)
Hi Matt, thanks for the reply! I actually cancelled/terminated the LLC due to financial reasons. Will I still owe the $800 next year? The cancellation was within 15 days of the actual submission date if that’s helpful.
Hi Ashley, if the cancellation date is 15 days or less from the LLC effective date and the LLC did no business, then there is no franchise tax or tax filing. This is because of the “15-day rule”. Hope that helps.
I formed an LLC in Oct 2020, but I did not file the statement of intention. I did not conduct any business. Should I terminate my LLC now and start it again to avoid the $800 fee due on Feb 15th and April 15th? I want to begin doing business with it early this year.
Thanks for any advice.
Hi Dave, before the LLC could be terminated, it would need to pay franchise tax for 2020 and 2021. You’ll want to file the Statement of Information. You can call the Secretary of State to determine the total amount due. And you can call the Franchise Tax Board regarding the balance owed. We recommend working with an accountant for file Form 568 and any other returns required. Hope that helps.
Hi Matt, I have a SMLLC for years that recently added a new member in late January 2020. For the 2020 tax filing year, are there 2 $800 payments? One for the SMLLC and one for the multi member return? Is there an AB bill for reference.
Much appreciated.
Hi Keith, no, there is just one franchise tax payment because there is just one LLC. You’ll want to sign an Assignment of LLC Membership Interest form (we don’t provide this form at this time) and amend the LLC’s Operating Agreement. You’ll also want to file Form 8832 with the IRS to change the LLC’s tax classification from taxed as a Disregarded Entity > Sole Proprietorship to taxed as a Partnership. And add them to the LLC bank account. Hope that helps.
Hello Matt I’m forming an llc. I wanted to know if I do it as of today will I have to pay the 800 tax?
Hi Shana, not in 2021, but you will beginning in 2022. Please see How Assembly Bill 85 now impacts California LLCs. Hope that helps :)
Hi Matt,
I formed an LLC and it was registered on 01/01/2020. I ended up not using this LLC and didn’t make any income neither had any expenses. I am planning to work on another business this year. Do you recommend closing my LLC to avoid paying the 2021 annual fee and creating a new LLC when I am ready later on in the year?
Thank you,
Linh
Hi Ling, closing the 1st LLC doesn’t mean the LLC doesn’t owe franchise tax. In fact, the LLC needs to pay outstanding franchise tax and file California returns (like Form 568) before it can be cancelled with the California Secretary of State. If you were thinking to form an LLC later in 2021, it will be less expensive and less of a headache to bring your current LLC up to date. Hope that helps.
Thank you so much for your help!
You’re welcome Linh :)
I opened a single-member LLC on Aug 12 2020. Due to COVID my business did not make any income at all. I ended up spending $1000+ with the initial setup creating an online presence. I am planning to close/ terminate LLC filing Form LLC-4/8). Can I terminate online or mail the form to Sacramento office?
According to the letter that I received from FTB, I need to file taxes by the 15th day of the 6th month which is by Feb 15 2021. If I terminate my company before Feb 15, 2021 do I still owe $800?
Hi Lakshmi, your LLC will owe an $800 payment for the 2020 tax year and one for the 2021 tax year (since the LLC has been in existence for more than 15 days in 2021). Really crappy rule, I know. The 15th day of the 6th month refers to the LLC Estimated Fee (Form 3536), which you won’t need to pay since gross receipts were less than $250k. The LLC will also need to file Form 568. We recommend working with an accountant to properly file the returns and pay any outstanding balance.
You can cancel your LLC online with the California Secretary of State. Their online filing system is called BizFile. Click “File Online”. On the next page, click “LLC Termination” and then follow the prompts. Hope that helps.
Hi Matt,
Currently, I am the sole prop of my business and would like to convert to LLC with my wife as my partner. My questions are:
1. Can I use my current DBA name?
2. Do I need to terminate my sole prop before I create an LLC?
Hi Michael, there isn’t really a “termination” of Sole Proprietorship, but more so just a “stop operating” as a Sole Proprietorship (and form the new LLC whenever you’d like). You’ll need to call the County Clerk where you registered the DBA name to see if you can transfer ownership to the LLC. If not, the LLC can usually just register a DBA under the same name (please confirm with the County Clerk).
On another note, we recommend reading Qualified Joint Venture LLC as that will be option for you and your wife. Hope that helps.
Hello Matt,
Happy New Year and Thank You for answering all of these questions. I started a LLC in California on Oct. 29th, 2020 and thanks to your Article on “Avoiding Back-to-Back CA Franchise Tax” – quickly Dissolved/Canceled it within 15 Days. I came back here to research whether I needed to complete the CA FTB Form 568 per the Cancellation process. It seems (if I ready correctly) that you already answered my concern from another question above. i.e. from ADAS Q&A:
“… (see California FTB: What is the 15-day rule): If an LLC hasn’t done any business and exists for less than 15 days, the LLC is not required to pay the $800 franchise tax or file a Form 568 tax return. Hope that helps :)…”
I am glad to say that I will be a Full-Time Student to LLC University henceforth.
Thank You.
-N.C.
Hi Nathan, Happy New Year! You’re very welcome. Yes, you are correct. To add more detail, as per the 15-day rule (source: Section 23114 of RTC), the LLC doesn’t pay the $800 franchise tax and the LLC doesn’t have to file any tax returns, including Form 568 (LLC Return of Income), if the LLC’s tax year is 15 days or less and there was no activity. And I’m so glad you find our site helpful!
I am transferring an LLC to Nevada and all the paperwork isn’t finalized yet will I still owe the $800 fee for 2021?
Hi Brady, the LLC in question, was it originally a California LLC? If so, what date was it approved? And by transferring, do you mean you are domesticating your California LLC into Nevada?
The LLC in question is originally a California LLC that was approved over 10 years ago and yes domesticating that LLC into Nevada.
Hi Brady, after the domestication process is complete, you’ll need to cancel/terminate the LLC in California. If it takes longer than 1/15/2021 then you’ll owe a franchise tax payment for 2021 (the Jan. 15th date is due to the 15-day rule). Your California LLC will also need to file a final tax return if it’s cancelled in 2020 or by 1/15/2021. If not, then the LLC owes franchise tax for 2021 and will also need to file a final tax return in 2022. We recommend getting in contact with the California Franchise Tax Board (FTB) and an accountant to make sure things are properly closed out with the FTB. Hope that helps.
Hi,
I closed my LLC within 12 days of formation and followed all rules & got the confirmation as well.
Few days back I received a letter from – LCPSS- a Labor law compliance notice for paying $125 before 24 Dec.2020, and this is- “ your business is required by Federal law to post a current compliant labor law poster.. “
Penalties would be $7000 or greater for non- compliance.
Question- do I need to pay $125? I have confirmation that my LLC doesn’t exist and is closed.
What to do?
Please advise urgently .. thanks
Hi Adas, that letter you got belongs in the garbage. It’s complete spam (pretty much a scam). If you look on the back or the bottom, it’ll say something like “We are not a government agency” and “This is not a bill”. So no, don’t send this bullshit company any money. They should be ashamed of their spammy-tactics. Also, it sounds like you cancelled your LLC correctly and there is no $800 franchise tax owed because of the 15-day rule. Hope that helps :)
Our professional corporation was filed on Jan 21, 2020. I forgot to pay the $800 tax to CA-ftb till now. We did not do any business due to the prevailing conditions. Now, I want to terminate the LLC before the end of the year. How much do I owe to ftb in this case?
Thanks for your service to a lot of new business owners. We wish you happy holidays.
Hi Srini, I’m unable to tell from your comment if you formed a Professional Corporation (PC) or an LLC in 2020. The Professional Corporation is exempt from its first year’s $800 minimum franchise tax payment, however, the PC pays tax on a percentage of its net income. If you formed an LLC, the $800 franchise tax payment is owed. Either way, after you terminate the entity in 2020 with the Secretary of State, you’ll need to contact the California Franchise Tax Board to see what payments are outstanding. And you’ll need to file final California tax returns in 2021 (for the 2020 tax year). We recommend working with an accountant.
Ok, yikes, I just filed the Articles of Organization for an LLC and it was approved on 12/16/2020. I haven’t yet filed a Statement of Information (Form LLC-12). Will I have the double payment? Should I cancel the Articles of Organization? I am not on any specific timeframe.
Hi Sara, yes, your LLC will owe an $800 payment for 2020 (due by March 15, 2021) and an $800 payment for 2021 (due by April 15, 2021). Please also read California LLCs and Assembly Bill 85. In short, California LLCs formed in 2021 don’t pay franchise tax their 1st year. In this case, you can cancel this LLC and refile in January. This will save you $1,600. And your first $800 franchise tax payment won’t be due until April 15, 2022. And you’ll be able to use the same LLC name, too.
How to cancel your California LLC:
You can cancel your LLC by filing online with the California Secretary of State. Their online filing system is called BizFile. Click “File Online”. On the next page, click “LLC Termination” and then follow the prompts.
If you take this route, you won’t need to file the first Statement of Information in question. You’ll file the first California LLC Statement of Information within 90 days of the new LLC being approved. Hope that helps!
I was working as a freelance tutor in 2020, and then realized that its better to open an LLC. Now that I waited till Dec, it makes sense to open in Jan 2021 to take advantage of $800. But in that case, will I be able to take tax exemptions for the home area that I have used to conduct the tutoring business in 2020?
Hi Shah, there are tax write offs for using your home for business for both a Sole Proprietorship (which you currently are) and an LLC (which by the way, is taxed like a Sole Proprietorship). So you can get the tax write offs now (as a Sole Proprietorship) and next year (as an LLC). We recommend speaking with an accountant (or a few) about the details. Hope that helps.
Hi Matt,
If we terminate our 5 day old LLC and refile with a 1 Jan 2021 date, will we be able to use the same LLC business name? Im thinking once the termination is approved the name will be available again to use? Or will we need to change the business name and get a new EIN? We don’t plan to start actively doing business until later in Jan 2021 but wanted to get a head start which now will be a costly $1600 mistake if we do nothing. Wish I’d read this last week.
Hi Cat, great question! Yes, the LLC name becomes available again in California once the cancellation is processed. Said another way, yes, you’ll be able to file the California LLC again using your same name. You can cancel/terminate the CA LLC online via BizFile. Click “File Online”. On the next page, click “LLC Termination” and then follow the prompts. Hope that helps :)
I just formed my LLC on December 8 and got approved today. I didn’t know about the 15 day rule until this minute. is there anything i can do to change file date?
Hi Linda, no, you can’t change the date once it’s been formed. However, you can cancel the LLC and then re-file the LLC (using the same name) in January. You can file the LLC cancellation online with the California Secretary of State. Their online filing system is called BizFile. Click “File Online”. On the next page, click “LLC Termination” and follow the prompts. Hope that helps.
Hi Matt!
I did something stupid and filed my LLC earlier today without a future file date. Do you happen to know how this can be cancelled or if there are repercussions for cancelling the LLC? (I assume that’s different from termination?)
I suppose re-filing will be another $70, but still better than $800. If anybody reading has an answer: do you think we can contact the Secretary of State office to change the future file date?
Thank you!
Hi Krish, you can cancel your LLC by filing online with the California Secretary of State. Their online filing system is called BizFile. Click “File Online”. On the next page, click “LLC Termination”. You’ll need to wait a few days until your LLC is approved before you can file the termination. Hope that helps.
Thanks, Matt! Appreciate the reply! I don’t know how you have the time to answer our questions in depth, but I’m grateful you saved me $800. I did it that way and terminated my LLC the same day it got approved. I was ready to eat up the $70, but that charge was probably dropped by the Secretary of State, so I wasn’t charged twice.
You’re welcome Krish! Thank you ;) Heck yes! So awesome to hear that you got it done and also saved $800 :)
Hi Matt
I am 20 days late to pay my first franchise tax. How to calculate the amount of late penalty and how do I pay the penalty.
Hi Edward, you’ll want to call the California Franchise Tax board to get the total.
Hi Matt-
Great information as usual. We need to form another LLC and I am concerned with the filing/Franchise tax fee. I understand With the new AB 85 we can avoid the $800 for 2021 if we file for our LLC Jan. 2021, but does the 15 day rule STILL apply ….In other words if we future file now for LLC start on Dec. 17th or 18th 2020, will we still avoid paying $800 until April 15, 2022? thanks for all of your help- for 3 years now!
Hi Claire, thank you :) That is a very interesting question. However, I don’t think it’ll accomplish what you want. For example, if the LLC is formed with a future file date of 12/18/2020, it doesn’t owe an $800 payment for 2020 (because of the 15-day rule). However, because the LLC went into existence in 2020, it must pay its 2021 $800 payment by April 15th, 2021. So in this arrangement, because the LLC didn’t go into existence in 2021, it’s not able to take advantage of the Assembly Bill 85 exemption. Hope that helps.
Bummer, but This makes sense. Now I just have to find out if I can put some film investment money someplace else til either Mid Dec. or better- Jan. before forming the LLC ….Off to the CPA. Thanks Matt!
I hear you Claire. On a positive note, at least you know ahead of time. You’re welcome :)
Thank you. But would I be liable to pay $800 now as well? And can I open a new LLC in January or February next year ?
Hi Adas, if the LLC has existed for less than 15 days, then no $800 franchise tax will be due. You can open a new LLC and either wait until 2021 to file it or you can file it now and use a future file date (via the online LLC filing) of 1/1/2021. If the new LLC goes into existence in 2021, because of Assembly Bill 85, the first $800 payment will not be due until April 15th 2022.
Thanks so much Matt. I just cancelled it online. They charged me $5 but it’s okay. I just hope that they accept this submission. And I don’t have to pay $800 now. Can you share the clause which says that less than 15 days won’t be charged? Only if it’s okay with you. Just wanted to be sure that I don’t get liable for anything. Thanks
Hi Adas, this comes from the 15-day rule (see California FTB: What is the 15-day rule): If an LLC hasn’t done any business and exists for less than 15 days, the LLC is not required to pay the $800 franchise tax or file a Form 568 tax return. Hope that helps :)
You are a savior. Thanks so so much. Bestest wishes,
Adas
You’re very welcome Adas!
No it was registered on Nov 6,2020. It’s only Nov.16th today. It’s been 10 days. Can I cancel my registration?
Hi Adas, yes, you can cancel the LLC. Don’t file by mail, since it won’t be dated within the timeframe. 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. Hope that helps.
Hi Matt,
I registered my LLC (Domestic) in CA on 11.06.2020. How do i proceed? Can i cancel to avoid taxes twice? What about S Corp? Heard that this small corp waives corporate tax. How does one create that? Please advise. Any suggestions.
Please revert ASAP.
Best,
ADAS
Hi Adas, since the LLC has already existed for more than 15 days, the LLC will still owe franchise tax and need to file Form 568. You may not want to elect S-Corp treatment just to avoid the franchise tax fees, since S-Corps have costs. Please see LLC taxed as S-Corporation for more details. Hope that helps.
Hi Matt,
If I put the future file date of my LLC as 12/16/2020 and complete everything online, am I covered by the 15 day rule regarding not paying the $800 fee twice? Thanks.
Donna, if you’re using a future file date in December to avoid paying the $800 fee twice, the earliest date should be December 17, 2020. The 16th is not within that 15-day period.
Hi Donna, that means the LLC will be in existence for 16 days. Also, due to Assembly Bill 85, LLCs that go into existence in 2021, are exempt from the first year’s $800 payment (first $800 payment will be due by April 15th 2022). We are working on this update now and will push live to the site this week. If important, you may want to consider cancelling your LLC filing and refiling with a future file date of 1/1/2021. Apologies for any confusion. And I hope that helps.
If you file on December 17, 2022, is the first $800 payment due on April 15, 2024? In other words, is the first year exemption for 2022, or 2023?
Hi Julian, because the 15-day rule also applies, the first taxable year would be 2023… which would be exempt. So first payment would be due April 15, 2024.
Hi Matt,
Thank you so much for all this valuable information you put on your website.
I am going to open an LLC in a few days, I was wondering:
if I will use the “future file date” does it mean that I cannot do anything to set up the LLC like open bank accounts, trademark brand, etc. until the effective date?
Thank you
Hi Vince, you’re very welcome! Yes, correct. Most banks will not let you open an account for an LLC that isn’t in existence yet. However, we recommend calling the bank and speaking to the branch manager to double check. Also, due to changes in California (Assembly Bill 85), we recommend filing the LLC with a future file date of January 1, 2021. This will save you $1,600 in 2021. However, if you don’t care about that and you need to get things started right away, you can certainly file the LLC and have it go into existence the moment it is approved by the California Secretary of State. Hope that helps.
I started a LLC in November 2019 with my business partner and didnt make the payment deadline on the 15th of Februaury, 2020. What will I be expecting in terms of penalties and fees?
Hi Ramon, to bring your account up to date, you’ll need to call the California Franchise Tax Board and they can do a quick review on the account. Hope that helps.
Matt
I am ready to establish my LLC in Feb/March 2020. Should I wait until after April 15th to avoid the additional $800 assessment due April 15?
Thanks!
Hi Brian, it won’t matter much at this time of year. Either way, you’ll still owe $800 for the 2020 year and it’ll be due the by “15th day of the 4 month” after your California LLC is approved (the approval month is counted as month 1). So if your LLC was approved on April 20th 2020, your first $800 payment (paying for the 2020 year) would be due July 15th 2020. Then next year, and every year thereafter, the $800 payment is due by April 15th. If your LLC was approved on March 5th 2020, your first $800 payment (paying for the 2020 year) would be due by June 15th 2020. Then next year, and every year thereafter, the $800 payment is due by April 15th. Either way, you’ll need to pay an $800 franchise tax payment for the 2020 year. Hope that helps!
Thank you!
Hi there I set up an LLC 9/3/19. I never conducted any business and am using ‘ short form cancellation certificate – form llc-4/8 ‘ to close the business. Am I still going to owe the state taxes?
Hi Frank, you’ll want to call the California Franchise Tax Board to review your account, however, you likely owe an $800 payment since the LLC was active in 2019 (unfortunately). I know, a pretty crappy rule. You’ll also need to file a Form 568.
Thank you for this article! Very helpful! If I were to form my LLC by Jan 31st, will I still be able to avoid the double Franchise payment. I saw here that anything after the 15th of a month will not count as a month? So will that mean that $800 will need to be paid on April 15th and then again on May 15th?
Hey Tara, you’re very welcome! January is a great month to have your LLC approved. There is no back-to-back tax in this case since the first year you’re paying for is 2020. And that $800 payment is due the 15th day of the 4th month after your LLC is approved. Which is April 15th 2020 if the LLC is approved on 1/31/2020. That payment pays for the whole 2020 year. Your next $800 payment will be due by April 15th 2021. If your LLC is approved in February, your $800 payment is due by May 15th 2020 and the next payment will be due by April 15th 2021. The part you mentioned about the 15th of the month is not correct. I think you’re confusing that with the “15-day rule”, which is different and not applicable in this case. I hope that helps!
Form 3522 for filing annual $800 tax asks for period start and end date. Are the dates 1/1/2020 – 12/31/2020 assuming you’re paying this amount by April 15, 2020 ? I read somewhere that this is a prepay tax but wanted to confirm. Thanks
Hi Rahul, what date was your LLC approved by the California Secretary of State? How is your LLC taxed? And how many LLC Members (owners) are there?
we opened an LLC partnership(2 members) in January 2019. we filed the tax (min 800) within 3 months of formation.
after filing tax of 800, one member left LLC and now its sole properitorship .Just to update IRS we only sent form 8882-B.
They sent us a notice that they received form 8822-B
Do we need to pay 800$ for this year(2019) again since our LLC got changed from partnership to sole properitership.
Hi Abhisekh, the IRS has nothing to do with the California $800 Annual Franchise Tax. This tax is a state tax imposed by California on LLCs for the privilege of doing business in the state. The fact that one of your Members has left does not stop your LLC’s obligation to pay the Annual Franchise Tax. Additionally, 8822-B is an IRS form used to change the address of an LLC or the EIN Responsible Party. It doesn’t change the tax classification of the LLC. In order to update the IRS about the change in tax classification (going from an LLC taxed as a Partnership to an LLC taxed as a Sole Proprietorship), you need to file Form 8832. And your California LLC needs to meet all its tax filing obligations in California, regardless of how many Members there are and regardless of how much revenue it makes. Hope that helps.
Hi,
So I formed my LLC in March of 2018…so I’m screwed and have to pay the $800 regardless…but what if I want to avoid paying it again for 2019? Am I too late since it’s already Jan 2019? I’m in the process of closing my business, will I still have to pay the $800 again in April of 2019? Or is there anything I can do? Thank you!!
Hi Mike, you do owe franchise tax and a return for 2018. If the dissolution is filed (and received) by January 15th, you won’t owe franchise tax for 2019. Hope that helps.
Happy New year Matt,
If I dissolve my LLC on January, do I owe $800 to CA state?
Hi Kevin, when was the LLC formed? Is the LLC doing business now/in January 2021?
Hi I just recently got my Llc January 1st so would that mean I owe the 800 in December I’m just a little be confused on how it all works. Some people are saying it’s due in April .
Hi Taylor, do you know the exact effective date of your LLC? If not, feel free to share the LLC name and we’ll check for you.
It’s was 1/1/2021
Hi Taylor, because of the new law passed via Assembly Bill 85 (see California LLCs don’t pay franchise tax for 1st year), your LLC doesn’t need to pay an $800 franchise tax payment in 2021. The first franchise tax is due by April 15, 2022 (this pays for the 2022 tax year). However, if your LLC’s gross receipts are above $250k, your LLC still must pay an LLC Estimated Fee. And regardless of activity or income, your LLC also needs to file Form 568 (LLC Return of Income). That is for every taxable year the LLC exists. Hope that helps.
Yes it does thank you !!