Key Takeaways

  • Forming an LLC in California involves state filing fees, annual franchise tax, and possible additional fees based on total income over $250,000.
  • The base Articles of Organization filing fee is $85, plus $20 for the initial Statement of Information and any applicable city or county business license fees.
  • All California LLCs owe an $800 annual franchise tax starting in year two, regardless of profit, and may also owe a graduated LLC fee of $900–$11,790 depending on gross revenue.
  • Additional costs may include expedited filing fees, registered agent services, certified copies, and legal or accounting services.
  • Ongoing compliance includes biennial Statements of Information, license renewals, and industry-specific permits to avoid penalties or suspension.
  • Forming out-of-state rarely avoids these costs if you operate in California, due to foreign LLC registration requirements and identical tax obligations.

How much an LLC costs in California is a question that many entrepreneurs in the state of California have. There are filing fees and annual fees associated with the formation and maintenance of an LLC. You can expect to pay at least $900 in fees when starting a California LLC. Since these fees can be significant, it is essential that entrepreneurs know about these fees before going through the process of forming an LLC.

California LLC and Corporate Taxes & Fees

Many people wonder about the LLC fee and corporate tax in California when they're getting ready to set up their business in the state of California.

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

There are also strategies, exemptions, and deductions that exist that will help you reduce this corporate tax rate. There are also many advantages associated with different types of corporations that entrepreneurs can benefit from.

Understanding the $800 Franchise Tax and LLC Fee Thresholds

California’s LLC tax structure has two main components:

  1. Annual Franchise Tax – Every California LLC must pay the $800 minimum franchise tax, regardless of income. However, newly formed LLCs benefit from the first-year waiver, which can significantly reduce startup costs.
  2. Additional LLC Fee Based on Total Income – If your LLC earns more than $250,000 in total annual income (including worldwide earnings), you’ll owe an extra graduated fee:
    • $900 for $250,000–$499,999
    • $2,500 for $500,000–$999,999
    • $6,000 for $1,000,000–$4,999,999
    • $11,790 for $5,000,000+

These amounts are in addition to the $800 tax. Since income is calculated on a gross basis, businesses with significant revenue but low margins should budget carefully to cover these obligations.

How the LLC Fee is Calculated and Reported

California calculates the additional LLC fee based on your total worldwide gross income, not just California-sourced revenue. This means that if your LLC operates in multiple states or earns revenue from clients outside California, all of that income counts toward the threshold. LLCs report their estimated annual income using Form 3536 (Estimated Fee for LLCs) and pay the applicable fee by the 15th day of the 6th month of the current tax year. At the end of the year, actual income is reconciled on Form 568 (Limited Liability Company Return of Income), and adjustments are made if your actual earnings were higher or lower than estimated.

Comparing LLC Costs to Other Business Structures in California

While the LLC California cost is a major consideration, it’s important to compare it with other entity types. For example, corporations in California also face an $800 minimum franchise tax, but they are taxed at a flat corporate rate of 8.84%, which may result in higher taxes for profitable businesses. Sole proprietorships and general partnerships avoid the franchise tax but lack the liability protection of an LLC. For many small business owners, the LLC’s combination of legal protection, flexible taxation, and straightforward management outweighs the slightly higher annual fees compared to informal business structures.

Tax Flexibility Advantages Despite Higher Costs

While LLCs may appear more expensive than sole proprietorships or general partnerships due to the $800 franchise tax, they offer flexible tax classification. By default, single-member LLCs are taxed as sole proprietorships and multi-member LLCs as partnerships, avoiding corporate-level taxation. However, LLCs can elect to be taxed as S corporations or C corporations, potentially reducing self-employment taxes or taking advantage of corporate deductions. This flexibility can offset the higher base costs over time for businesses with strategic tax planning needs.

LLC Cost California vs. Out-of-State Formation

Some entrepreneurs consider forming their LLC in states with lower fees, but if you operate in California, you must register as a foreign LLC and still pay the $800 annual franchise tax plus any additional LLC fees. This means that forming out of state rarely saves money for businesses physically operating or deriving income from California. Additionally, foreign LLC registration involves its own filing fee ($70) and ongoing compliance obligations, which can increase total expenses.

Why Out-of-State LLC Formation Often Costs More

Some business owners consider states like Delaware, Nevada, or Wyoming for lower initial filing fees or no annual franchise tax. However, if your company does business in California, you must still register as a foreign LLC, pay the $800 annual franchise tax, and meet California’s additional LLC fee requirements. You will also incur costs for maintaining your LLC in the other state, including registered agent fees and annual reports, effectively doubling compliance obligations. In many cases, this makes out-of-state formation more expensive in the long run.

Overview of California LLC Franchise Tax and Additional Fees

In addition to the standard corporate tax rules, California imposes a franchise tax on LLCs that operate or are registered in the state. Every LLC must pay a minimum annual franchise tax of $800 to the California Franchise Tax Board, regardless of income level. This fee is due even if the LLC is inactive or operates at a loss.

LLCs with total annual income from all sources exceeding $250,000 are subject to an additional LLC fee. This fee is based on a graduated scale:

  • $900 for income between $250,000 and $499,999
  • $2,500 for income between $500,000 and $999,999
  • $6,000 for income between $1,000,000 and $4,999,999
  • $11,790 for income of $5,000,000 or more

Total annual income includes worldwide revenue, not just California-sourced income.

First-Year Franchise Tax Waiver and Exceptions

California currently offers a first-year waiver of the $800 annual franchise tax for newly formed LLCs, LLPs, and corporations. This means your business will not owe the $800 tax until the second tax year, although you must still pay any applicable graduated LLC fees based on your gross income. Certain entities—such as nonprofit organizations that qualify for tax exemption—are not subject to the franchise tax at all. This waiver can provide significant savings for startups focused on minimizing early-stage expenses.

California Fees for Incorporation

There are a number of fees associated with the incorporation process in the state of California. For example, entrepreneurs will need to pay a fee to reserve a name. The fee will need to be payable to the city or county where the entrepreneur is incorporating. The fee will vary from city to city and county to county.

The filing fee for the Articles of Incorporation in California is $100. There is also a handling fee of $15.

You will also need to file an initial report, which contains information about the business. The fee for filing the initial report is $25, and there is a service fee of $75. Every year, the state of California requires that corporation owners file annual reports. The filing fee for the annual report is $25.

The majority of corporations are also required to pay an annual tax. The minimum annual tax is $800, and this tax is paid to the California Franchise Tax Board.

If you need to get business licenses for your corporation, you will likely need to pay fees. A small business license costs $50 to $100 in the vast majority of cities and jurisdictions. The price of a license depends on the type of business and the industry.

Online vs. Mail Filing Costs and Processing Times

Filing your LLC paperwork online through the California Secretary of State’s bizfile Online portal typically results in faster processing—often within 5–10 business days—compared to mail filings, which can take several weeks. The base filing fee remains the same ($85 for the Articles of Organization), but expedited service is available for additional fees ranging from $350 for 24-hour processing to $750 for same-day turnaround. Businesses with tight launch timelines often opt for expedited filing to begin operations sooner.

Choosing Expedited Filing for Faster Approval

California offers expedited filing for LLC formation at three levels:

  • 24-hour processing – $350 in addition to the standard filing fee.
  • Same-day service – $750 extra.
  • 4-hour service – $500 extra, available only for in-person submissions in Sacramento before 9 a.m.
    These expedited options can be beneficial for entrepreneurs facing contractual deadlines, needing rapid access to business bank accounts, or aligning their start date with a specific tax year.

Other Potential Costs When Forming an LLC in California

While the Articles of Organization filing fee ($85) and the initial Statement of Information fee ($20) are the primary state-level costs, there are other expenses you may encounter:

  • Registered Agent Fees: If you hire a commercial registered agent service, expect to pay $100–$300 annually.
  • Expedited Filing Fees: California offers 24-hour and same-day expedited processing for an additional $350–$750, depending on the speed requested.
  • Business Licenses & Permits: Depending on your location and industry, you may need multiple licenses. Many cities charge between $50 and $100 for a standard business license, but costs can be higher for regulated industries such as food service, construction, or cannabis operations.
  • Name Reservation Fee: Reserving your LLC name before filing costs $10.
  • Certified Copies: If you request certified copies of your filing documents, there is a $5 certification fee plus $1 for each additional page.

Industry-Specific Licensing and Permit Costs

In addition to standard business licenses, certain industries in California require specialized permits with varying costs:

  • Construction – State contractor licenses starting at around $300 plus bonding requirements.
  • Food service – Health permits often $300–$1,000 annually depending on facility size.
  • Cannabis businesses – State licenses starting at $1,000, plus local permits that may exceed $10,000 annually.
  • Professional services – State board licenses for fields like law, accounting, or real estate, with initial and renewal fees.
    Factoring these into your startup budget ensures a more accurate projection of your LLC California cost.

Optional but Common Professional Service Costs

While not legally required, many LLC owners hire professional services for efficiency and compliance. Common examples include:

  • Registered Agent Services – $100–$300 annually if you don’t use your own California address.
  • LLC Formation Services – Professional preparation and filing of Articles of Organization can cost $50–$500 depending on the provider and package features.
  • Legal and Accounting Advice – Initial consultations with attorneys or CPAs can range from $150 to $500+ per hour but can prevent costly mistakes.
  • Ongoing Bookkeeping or Tax Prep – Monthly bookkeeping packages can range from $150 to $400, while annual tax preparation varies based on complexity.

Factoring these into your budget provides a more realistic picture of the total LLC cost in California.

Ongoing Compliance and Renewal Costs

Beyond the initial setup, California LLC owners must budget for recurring compliance costs. These may include:

  • Biennial Statement of Information: Due every two years after the initial filing, with a $20 fee.
  • Business License Renewals: Most cities and counties require annual license renewals, which can range from $50 to several hundred dollars, depending on industry and location.
  • Fictitious Business Name (DBA) Renewal: If your LLC operates under a DBA, you must renew it periodically (typically every five years) and pay the applicable local fee.
  • Industry-Specific Permits: Certain regulated businesses, such as those in food service or construction, may require ongoing permit renewals with associated fees.

Properly tracking these deadlines can help you avoid late penalties and maintain good standing with state and local authorities.

Biennial vs. Annual Filing Requirements

While California’s Statement of Information for LLCs is due every two years, some local jurisdictions require annual business license renewals or annual tax filings regardless of state requirements. Missing these deadlines can result in local penalties even if your state filings are up to date. Maintaining a centralized compliance calendar covering both state and local obligations helps avoid costly oversights.

Penalties for Non-Compliance

Missing filing deadlines or failing to pay required fees can be costly:

  • Late Payment Penalties – 5% of the unpaid tax plus 0.5% monthly interest.
  • Late Statement of Information – $250 penalty from the Secretary of State if filed after the due date.
  • Suspension or Forfeiture – The Franchise Tax Board may suspend your LLC’s rights, preventing you from entering contracts, suing in court, or protecting your business name until you reinstate by paying fees and penalties.

Maintaining a compliance calendar is critical to avoid these consequences.

California LLC Fees and Taxes

It costs less to form an LLC in California than it does to form a corporation. The LLC fee in California is $85, and this fee should be made payable to California's secretary of state. 

Entrepreneurs also need to pay a fee for the Statement of Information. LLC owners need to submit this document within three months of forming an LLC. The filing cost for the Statement of Information is $20.

LLC owners also need to pay fees for business licenses. The fees depend on the city or jurisdiction where the company was formed.

Small business licenses cost up to $100, and it may be necessary to get business licenses for your LLC that are specific to your industry.

If you own an LLC, you will need to pay fees that are ongoing. The LLC fee schedule in California includes an annual fee. This annual fee is $800 and is due every April 15. For an LLC that has just been formed, the owners need to pay this annual fee within 3.5 months of formation.

For the purposes of tax, a single-member California LLC is treated like a sole proprietorship. On the other hand, a multiple-member LLC is treated like a partnership.

The tax fee for an LLC in California is based on the total income received by the LLC. This income can come from sources all over the world. The IRS doesn't tax LLCs directly. The income of an LLC is reported on the individual tax returns of the members.

If the net annual income of your LLC is greater than $250,000, you may need to pay an extra fee along with the regular filing fee for the annual tax return.

If your LLC decides to hire employees, your LLC will need to register for these payroll taxes:

  • Disability insurance
  • California Employee Withholding Tax
  • Unemployment Insurance Tax

Tax Filing and Payment Methods for LLC Owners

LLC owners in California can pay their annual franchise tax and any additional LLC fee online through the Franchise Tax Board’s Web Pay system, by credit card, or by mailing a check with the proper tax voucher form. While electronic payment is often faster and easier to track, mailing payment can be a good option for those who prefer a paper record. Keep in mind that payment deadlines are firm—failure to pay on time can result in a late payment penalty of 5% of the unpaid tax plus 0.5% interest per month, in addition to jeopardizing your LLC’s active status.

When and How to Pay Your California LLC Fees

The $800 annual franchise tax for an LLC’s first year is due by the 15th day of the 4th month after formation. For most LLCs, this means within 3.5 months of filing the Articles of Organization. Subsequent annual franchise taxes are due on April 15 each year.

The additional LLC fee for companies with income above $250,000 must be paid by the same due date as the annual tax. These payments can be made online through the Franchise Tax Board’s Web Pay system or by mail with the correct forms (LLC Tax Voucher Form 3522 for the annual tax and LLC Estimated Fee Form 3536 for the additional fee).

Failing to pay on time can result in penalties and interest. The Franchise Tax Board may also suspend or forfeit your LLC’s status, which can limit legal rights and business operations until fees are paid and the entity is reinstated.

Frequently Asked Questions

  1. How is the California LLC fee calculated?
    It’s based on your total worldwide gross income for the year, with tiered rates from $900 to $11,790 for income above $250,000.
  2. Can I avoid the $800 franchise tax in my first year?
    Yes. New LLCs formed after January 1, 2021, are exempt from the $800 tax for their first taxable year, but must still pay any income-based LLC fee.
  3. Is expedited filing worth the extra cost?
    If you have urgent contracts, need a bank account quickly, or want to start before year-end, expedited filing can justify the additional $350–$750 fee.
  4. Will forming my LLC in another state save me money?
    Usually not. If you do business in California, you must register as a foreign LLC and pay the same taxes and fees, plus out-of-state maintenance costs.
  5. What ongoing compliance costs should I expect?
    Biennial Statement of Information filings ($20), annual local business license renewals, possible industry-specific permits, and the $800 franchise tax.

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