California LLC: the $800 nobody mentions until it's due

The Secretary of State charges $70 to form an LLC in California, which is cheap — 37 states charge more to file. The Franchise Tax Board then charges $800 a year for the privilege of the LLC existing, whether it trades, whether it profits, whether it does anything at all. Over five years, filing yourself and acting as your own agent, California costs $4,130 — the most of any state in the country, and more than half as much again as second-placed Massachusetts at $2,600. The filing fee is under 2% of it.

The $800 is not a tax on income. It is a minimum franchise tax, and there is no version of a California LLC that doesn't pay it. There used to be a way out — a first-year waiver that ran from 2021 — but it expired, and it does not apply to any LLC organised on or after 1 January 2024. If a site or a formation service tells you the first year is free, it is quoting a rule that ended.

This is the part almost nobody is told. The first year's $800 is dated from your filing; every year after it is dated from the calendar. Those two rules collide in the second half of the year. Below is every filing month, with when the first payment falls due, when the second one does, and how much breathing room you get between them. The total is $1,600 in all twelve rows — what changes is whether you have a year to find it or four weeks.

So if it is September and the business isn't earning yet, the cheapest thing you can do is wait until January. You lose nothing — a sole proprietorship can sign contracts, take card payments and open a business bank account with your own name and Social Security number — and you keep $800 for a year.

And if you must have the LLC in December, there is one narrow escape. The Franchise Tax Board's 15-day rule: if the LLC's Articles are filed within the last 15 days of your tax year and it conducts no business in California in that period, the short year doesn't count. No return, no $800 for it. For a calendar-year LLC that means filing on or after 17 December and doing genuinely nothing — no invoices, no contracts, no sales — until 1 January. The first $800 then belongs to the new year and is due the following 15 April.

Two agencies, four recurring obligations, and one of them is at the city. This is the whole list for a small California LLC with no employees. Nothing here is optional and nothing here is filed by anyone but you.

The Statement of Information is the one people lose. It's $20, it takes four minutes, and the penalty for missing it is $250 — twelve times the fee — assessed by the Franchise Tax Board, not the Secretary of State, so it arrives from an agency you weren't expecting to hear from. Diary it for day 60, not day 89.

Above $250,000 California adds a second, separate charge: the LLC fee. It is levied on total income from California sources — turnover, not profit, with no deduction for what it cost you to earn it. A business that turned over $520,000 and cleared $38,000 pays the same $2,500 as one that cleared $300,000.

The cliff is the cruel part. At $249,000 of revenue you owe nothing; at $250,000 you owe $900, and the extra dollar of turnover has cost you nine hundred. The same happens at half a million. If you are within a few thousand dollars of a threshold in December, the timing of one invoice is worth more than it looks.

And the fee is estimated in advance. Form 3536 is due by the 15th day of the 6th month of the tax year — 15 June for a calendar-year LLC — with your best guess at what you'll cross. Underestimate and there's a 10% penalty on the shortfall. Most small LLCs never touch this; if you're heading past $250,000, tell whoever does your taxes in the spring, not the following March.

California cities levy their own business taxes, and they are not connected to the state filing in any way — nothing about registering with the Secretary of State tells your city you exist. You register separately, usually within a couple of weeks of starting to trade, and you renew every year.

Los Angeles is the one worth spelling out because its exemption catches people. A business with under $100,000 of worldwide gross receipts owes no city business tax — but only if it registers for a Business Tax Registration Certificate and files the renewal on time. The renewal is due in the new year and becomes delinquent at the end of February; for the 2026 period the last timely date was 2 March. File it late and you lose the exemption entirely, and then owe the tax plus interest at 0.7% a month plus a penalty that starts at 5% and reaches 40% by July.

San Francisco, Oakland, San Diego and San Jose all run their own versions with different thresholds and different due dates. Search "[your city] business tax registration" and read the city's own page — not a formation service's summary of it.

In most states this question doesn't arise, because most states charge $50 to $150 a year and the answer is obviously yes. California is different: $800 a year is a real cost to a business making $2,000 a month, and paying it for a business making nothing is just a donation.

So the honest test is whether you are carrying risk that the LLC would contain. If customers come to your premises, if you go to theirs, if you sign a lease or take deposits or handle other people's property or hire anyone — form it, and pay the $800, because one incident costs more. If you are freelancing from a laptop, invoicing three clients who all pay by bank transfer, and the worst realistic outcome is a client refusing to pay you, a sole proprietorship carries almost the same risk and costs nothing. Get proper liability insurance either way; it does a job the LLC does not.

What an LLC will not do is lower your California taxes. A single-member LLC is disregarded: the profit goes on your personal return exactly as it would without one, and California's income tax applies at the same rates. The $800 is a cost on top, not a trade. The six formation steps, and every state's fees, are on the hub page, and the LLC-or-sole-proprietor decision has its own page.