California LLC Tax and Franchise Fee

I fielded a series of California LLC questions yesterday that I am sure come up quite frequently for people beginning new ventures and selecting an appropriate California entity for that venture.

 

How is the California Franchise Tax Calculated?

California LLCs are subject to a $800 annual LLC tax. The annual tax is due on the 15th day of the 4th month after the tax year begins.

LLCs are also subject to the LLC fee, commonly referred to as the franchise tax. This fee is based on the LLC’s total income “from all sources derived from or attributable to this state” (R&TC Section 17942).  California has a broad interpretation of income attributable to the state addressed here. LLCs must estimate and pay the annual fee by the 15th day of the 6 month of the current tax year.

Here is the breakdown of the fee structure:

  • If the total income is $250,000 – $499,999, the fee is $900.
  • If the total income is  $500,000 – $999,999, the fee is $2,500.
  • If the total income is$1,000,000 – $4,999,999, the fee is $6,000.
  • If the total income is $5,000,000 or more, the fee is $11,790.

LLCs must file and pay the annual tax and fee if any of the following conditions apply:

  • It organized in California.
  • It registered with the SOS to transact business inCalifornia.
  • It does business in California.

Depending on the total income of your LLC, you may not face the franchise tax at all, but you won’t escape the minimum $800 annual tax.

An abundance of LLC information can be found here, or you can give us a call to discuss your options at 415-781-4000.