What Is the Cost of An LLC in California?

The cost of an LLC in California is one topic that many entrepreneurs contemplate before beginning the process of forming an LLC. Owners of LLCs need to pay filing fees and annual fees. Since these fees can add up over time, it's not surprising that many entrepreneurs are interested in learning more about LLC costs.

California LLC Fees and Taxes

The cost of LLC formation in California is less than that of corporation formation. The fee for forming an LLC in California is $85 and the founders of an LLC should make this fee payable to the Golden State's Secretary of State.

Founders of a new LLC should also anticipate paying a fee for filing the Statement of Information. The Statement of Information is a document that founders need to file within 90 days of forming their LLC. The filing cost for the Statement of Information is $20.

LLCs in the state of California also need to pay fees for business licensing. These fees differ from jurisdiction to jurisdiction. Therefore, some jurisdictions may be more preferable than others when it comes to forming and operating an LLC.

Founders can expect to pay at least $50 for a small business license for their LLC. Depending on the industry in which the LLC operates, the founders may also need to buy industry-specific business licenses.

Owners of LLCs need to pay fees on a regular basis. The fee schedule for a California LLC includes an $800 annual fee. Owners of a newly founded LLC will need to pay this fee within 105 days of forming their LLC. Every following year, the annual fee will need to be paid on April 15.

LLC owners need to send their Franchise Tax by filing the FTB Form 3522 to the Franchise Tax Board. The FTB Form 3522 refers to the LLC Tax Voucher.

If the annual fee for an LLC is submitted late, there is a $25 late fee. 

A defining feature of an LLC is pass-through taxes. The IRS does not tax LLCs directly. The income of an LLC is split up among the members and reported on the tax returns of each member.

For the purposes of tax, a California LLC with just one member is viewed as a sole proprietorship. An LLC is viewed as a partnership if there are multiple members.

The tax fee for an LLC in California is based on the total earnings of the LLC from all sources. 

The personal income tax is as low as 1.25 percent and as high as 9.55 percent. This personal income tax is applicable for up to one million dollars in personal income. Most people will fall within the tax bracket corresponding to 8.25 percent to 9.55 percent.

If the net annual income of your LLC is greater than $250,000, you may have to pay another fee with the annual tax return. You will need to fill out the Limited Liability Company Return of Income or Form 568. The tax return for an LLC is due on April 15 every year.

LLCs are taxed at a personal rather than organizational level. This makes taxes for LLCs in California very simple. The sales tax rate in California is 9.1 percent. 

To learn more about changes to annual taxes and fees, you should check the following:

  • California Franchise Tax Board
  • California Secretary of State
  • California Board of Equalization

LLC owners who play an active role in the LLC will likely have to pay taxes related to self-employment on their share of the profits of the LLC. The same is true for the partners of a partnership.

Members who are not active in the LLC do not have to pay self-employment taxes. An individual who is currently in this situation should speak to a tax advisor to determine whether they're required to pay taxes for self-employment.

California Fees for Incorporation

The corporate tax rate in California is 8.84 percent. This is comparable to the corporate tax rate in other states that are popular for incorporation.

If you need help with the cost of an LLC in California, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.