A California LLC owes $800 a year from the day its articles are filed, whether or not it ever trades. The tax runs until the Secretary of State files the cancellation. Nothing in between stops it.
The penalties on a forgotten entity come from dates, not income.
Who pays the $800
Revenue and Taxation Code Section 17941 imposes the LLC annual tax. It applies to any LLC doing business in California, or registered with the Secretary of State. The amount comes from the corporate minimum franchise tax in Section 23153: $800.
The FTB’s LLC page: “Every LLC that is doing business or organized in California must pay an annual tax of $800.” Limited partnerships and LLPs pay the same $800 under Section 17935 and Section 17948, due with the return.
For corporations it is the minimum franchise tax (a privilege-of-doing-business tax, owed even at a loss). The FTB’s corporation page: “Every corporation that is incorporated, registered, or doing business in California must pay the $800 minimum franchise tax.” An S corporation pays 1.5 percent of California net income, with the same $800 floor.
The first year: who is exempt today
Corporations get a first year free. Section 23153(f)(1): a new corporation “shall not be subject to the minimum franchise tax for its first taxable year.” Subdivision (f)(2) excludes limited partnerships, LLCs and LLPs by name.
Assembly Bill 85 waived the first-year $800 for LLCs, LPs and LLPs organized or registered from 2021 through 2023. The FTB’s LLC page still describes that window.
Nothing replaced it for 2024, 2025 or 2026. Section 17941(g) moves straight from that window to the next one. An LLC formed this year owes the full $800 in its first year.
The FTB’s What’s New page lists the next change, from the 2026 budget trailer bills. For tax years beginning in 2027, 2028 or 2029, the first-year tax is $400. Section 17941(g)(2) carries it for LLCs; Section 17935(f)(2) and Section 17948(e)(2) match it for LPs and LLPs.
The 15-day rule
Section 17946 is one sentence. An LLC owes nothing if it “did no business in this state” and its “taxable year was 15 days or less.” Both conditions must hold.
Form the LLC in the last 15 days of December, do nothing, and that year does not exist for tax. One transaction, or one day earlier, and the full $800 is due. Corporations have the same rule.
When the $800 is due, and on what form
The first-year payment runs from the filing date, not from January. The FTB’s LLC page gives “the 15th day of the 4th month from the date you file with the SOS.” Its example is an LLC registered on June 18, with tax due September 15.
After that, Section 17941(c) sets the 15th day of the fourth month of the taxable year. For a calendar-year LLC that is April 15. It is paid with Form 3522, the LLC Tax Voucher, never with Form 568.
So each year’s $800 is due in April of that same year. The booklet calls it “prepaid for the privilege of doing business in California.” One exit: Short Form Cancellation (SOS Form LLC-4/8) within a year of organizing, and no first-year tax is due.
The LLC fee and Form 3536
The fee sits on top of the tax, and only LLCs pay it. Section 17942 sets four tiers on “total income from all sources derived from or attributable to this state.”
- $250,000 to $499,999 of California income: $900.
- $500,000 to $999,999: $2,500.
- $1,000,000 to $4,999,999: $6,000.
- $5,000,000 or more: $11,790.
“Total income” means gross income plus cost of goods sold (the sales figure, not the profit). The Form 568 booklet confirms the base is “total California source income rather than” worldwide income. A loss-making LLC with $600,000 of California sales owes $2,500.
The fee must be estimated and paid by the 15th day of the sixth month of the year. For a calendar year that is June 15, on Form 3536. Underpay and Section 17942(d)(2) adds 10 percent of the shortfall.
The only safe harbor is paying at least the prior year’s fee. A first-year LLC has no prior year.
“Doing business” for the out-of-state LLC
An LLC never registered in California can still owe all of this. Section 23101(a) defines doing business as “actively engaging in any transaction for the purpose of financial or pecuniary gain or profit.”
Subdivision (b) adds bright lines, indexed each year. The FTB’s doing-business page gives the 2025 figures: California sales above $757,070, or property or payroll above $75,707. Each test is also met at 25 percent of the entity’s total, if lower.
Being organized or commercially domiciled here (managed from California) is a trigger on its own. The booklet adds one more: any member, manager or agent “conducting business in California on behalf of the LLC.” A Nevada LLC run from a kitchen in San Jose is a California taxpayer.
Form 568 and the penalty stack
An LLC taxed as a partnership files Form 568 by the 15th day of the third month after year end. A single-member LLC owned by an individual has until the 15th day of the fourth month.
The seven-month filing extension does not extend the time to pay the fee. When an LLC is simply forgotten, the penalties arrive in layers. The FTB’s penalties page and the booklet list them.
Late return, per member. Section 19172: $18 for each member, for each month, up to 12 months.
Late return, on the unpaid tax. Section 19131: 5 percent a month, up to 25 percent, and the “tax” includes the LLC fee.
Late payment. Section 19132: 5 percent plus 0.5 percent a month, for up to 40 months. The FTB computes it on the annual tax, the LLC fee and any nonconsenting nonresident members’ tax.
Then the rest. The 10 percent estimated-fee penalty, and interest from the original due dates. The $250 Secretary of State penalty if the Statement of Information lapsed. Each unfiled year repeats the stack.
Canceling: the tax that keeps running
The statute ties the tax to the Secretary of State’s records, not to activity. Section 17941(b)(1): it is paid “for each taxable year, or part thereof,” until a certificate of cancellation is filed. The FTB’s page: due “even if you are not conducting business, until you cancel your LLC.”
Closing takes three steps, set out in the booklet and Publication 1038. File a timely final Form 568, Final Return box checked, and pay the $800 for that year. File Certificate of Cancellation LLC-4/7 within 12 months, and do no California business after the final year.
File the LLC-4/7 after year end and “a subsequent year return and an additional $800 tax may be required.” And Publication 1038: “SOS cannot accept termination documents if FTB suspended or forfeited the entity.” A forgotten LLC must be revived and paid up before it can close.
What this means for your firm
These are small returns with unforgiving dates. The $800 falls due in April, the fee estimate in June, the return in March. Miss one and the stack starts.
Most of the damage is calendar and bookkeeping work, not tax law. We have written about why late entity returns are a bookkeeping problem first. If the books are the blocker, our bookkeeping service closes them before the return starts.
The Desk prepares these returns for firms. One enrolled agent prepares and a second reviews. The file comes back with the dates checked, the Schedule IW fee worksheet shown, and the member K-1s reconciled.
Our note on K-1 returns and basis schedules covers the member side. You review, you sign, you file. We never sign a return or e-file; your firm stays preparer of record.
5,300+ tax returns filed in the last 4 seasons. ISO/IEC 27001:2022 certified. How the engagement works is on our services page, and pricing is on the pricing page.
If you have a few forgotten LLCs in the pile, start with five returns.