California taxes LLCs more aggressively than almost every other state. The $800 annual franchise tax alone costs more than forming an LLC in most states. Stack on the gross receipts fee, California’s nation-leading income tax rates, and local business taxes — and the picture gets complicated fast.
This guide covers the four main ways an LLC gets taxed in California, what each one costs, and when the math changes. It’s not a substitute for a CPA, but it will make sure you’re not blindsided.
Disclaimer: This is general information, not tax advice. California tax rules are complex and change. Consult a licensed tax professional before making decisions about your LLC’s structure or filing.
The $800 Franchise Tax: California’s Baseline Cost
Before getting into income tax rates and gross receipts fees, understand the floor.
Every California LLC — regardless of revenue, regardless of profit — owes $800 per year to the Franchise Tax Board (FTB). You could form your LLC in January, make zero dollars, and still owe $800 for that tax year. The FTB doesn’t care if you’re still building your website.
The first payment is due on the 15th day of the 4th month after your LLC is formed. So if you form in October, that bill comes fast. After that, it’s due every April 15.
One actual bit of good news: LLCs formed between January 1, 2021 and December 31, 2023 got a first-year exemption. That exemption has since expired. As of 2026, first-year LLCs owe the $800.
This isn’t a tax on income. It’s not tied to revenue. It’s a flat fee for the privilege of operating an LLC in California. Budget for it from day one.
The Gross Receipts Fee: When Your LLC Earns More
On top of the $800 franchise tax, California charges an additional fee based on how much your LLC brings in. This is separate from income tax — it’s based on gross receipts, not profit.
The tiers:
| Gross Receipts | Annual Fee |
|---|---|
| Under $250,000 | $0 |
| $250,000 – $499,999 | $900 |
| $500,000 – $999,999 | $2,500 |
| $1,000,000 – $4,999,999 | $6,000 |
| $5,000,000+ | $11,790 |
Notice that the first tier is zero. If your LLC grosses under $250K, you only owe the base $800 franchise tax — not this additional fee.
Once you cross $250K in gross receipts, though, the jump is steep. A business bringing in $260K pays $900 more than one bringing in $240K, even if their actual profit is identical. Plan accordingly if you’re hovering near a threshold.
How Your LLC Is Taxed Depends on Its Classification
The IRS lets LLCs choose how they’re taxed. California follows federal classification with its own forms and quirks. Here are the four options.
Single-Member LLC (Disregarded Entity)
The default for a one-owner LLC. The IRS treats it as if the LLC doesn’t exist for tax purposes — all income flows directly to your personal return on Schedule C. You pay taxes at your individual rate.
California follows this treatment. The $800 franchise tax still applies at the entity level, but your actual income tax bill shows up on your personal California return (Form 540).
This is how most small LLCs are taxed. It’s the simplest setup.
Multi-Member LLC (Partnership)
Two or more owners? The default federal classification is a partnership. The LLC files Form 1065 federally and California Form 565. Each member receives a Schedule K-1 showing their share of income, deductions, and credits — which they then report on their personal returns.
The LLC itself doesn’t pay income tax. But it does pay the $800 franchise tax and potentially the gross receipts fee. Members pay California income tax on their share of profits.
LLC Electing S-Corp Status
An LLC can elect to be taxed as an S-Corporation by filing IRS Form 2553. In California, that means filing Form 100S with the FTB.
The S-Corp election doesn’t eliminate the $800 franchise tax. That’s a common misconception. California’s franchise tax applies to LLCs regardless of federal tax classification. You still owe $800 minimum.
What the S-Corp election can do is reduce your self-employment tax burden — but only if you’re earning enough profit to make the administrative complexity worthwhile. More on that below.
LLC Electing C-Corp Status
An LLC can also elect C-Corp taxation by filing IRS Form 8832. California form: 100. The LLC pays California’s corporate income tax rate of 8.84% on net income (there’s an $800 minimum franchise tax here too — it’s California).
C-Corp election makes sense in limited scenarios: if you’re raising venture capital, want to retain earnings in the business at a lower tax rate, or plan to offer stock options. For most small businesses, it creates double-taxation headaches. Pass.
California State Income Tax
California has the highest marginal income tax rate in the country. That’s not hyperbole — 13.3% at the top bracket is a number no other state matches.
For pass-through LLCs (single-member or partnership), you pay California income tax on your share of LLC profits at your personal rate. The brackets for 2025 (filing in 2026):
| Taxable Income (Single Filer) | Rate |
|---|---|
| $0 – $10,756 | 1% |
| $10,757 – $25,499 | 2% |
| $25,500 – $40,245 | 4% |
| $40,246 – $55,866 | 6% |
| $55,867 – $70,606 | 8% |
| $70,607 – $360,659 | 9.3% |
| $360,660 – $432,787 | 10.3% |
| $432,788 – $721,314 | 11.3% |
| $721,315+ | 13.3% |
(Married filing jointly brackets are approximately double. Check the FTB website for current figures.)
California’s filing deadline is April 15 — same as federal for most filers, with automatic extensions available. Quarterly estimated payments are required if you expect to owe $500 or more in California income tax for the year. Miss an estimated payment and you’ll owe penalties on top of the tax.
The FTB’s online portal handles estimated payments: ftb.ca.gov.
Self-Employment Tax
This is federal, not California-specific, but it hits LLC owners hard enough to cover here.
If your LLC is a disregarded entity or partnership, you’re self-employed in the eyes of the IRS. That means self-employment tax: 15.3% on net earnings (12.4% Social Security + 2.9% Medicare) up to the Social Security wage base, then 2.9% above that. High earners add another 0.9% Medicare surtax.
On $80,000 of net profit, you’re looking at roughly $11,300 in SE tax before any income tax.
Does the S-Corp Election Help Here?
Yes — potentially. With an S-Corp election, you split your income into a “reasonable salary” (subject to payroll taxes) and a distribution (not subject to SE tax). If your net profit is $120,000 and you pay yourself a $70,000 salary, only the $70,000 gets hit with payroll taxes. The $50,000 distribution escapes SE tax.
The math works out to meaningful savings once you’re earning $40,000+ in net profit. Below that, the added costs — payroll processing, extra tax filings, potentially an accountant — eat up the savings.
In California specifically, the calculus is more complex because the S-Corp election doesn’t reduce your $800 franchise tax. Run the numbers with an accountant before making the switch. It’s genuinely worth the consultation fee.
Sales Tax
California’s base state sales tax rate is 7.25% — the highest state base rate in the country. Local jurisdictions add between 0.15% and 3.25% on top of that, so your actual rate depends on where you’re selling.
Los Angeles County: 10.25%. San Francisco: 8.625%. Some cities in the Los Angeles area hit 10.75%. Check your specific location using the California Department of Tax and Fee Administration (CDTFA) rate finder.
Who needs to collect sales tax?
If you sell tangible personal property in California, you need to collect and remit sales tax. Services are generally exempt — but “generally” is doing a lot of work there. Some services are taxable (certain repair services, for example). Software sold as a digital download has its own treatment. When in doubt, check with the CDTFA or a tax professional.
How to register: Through the CDTFA at cdtfa.ca.gov. Registration is free.
Filing frequency: Depends on your sales volume. High-volume sellers file monthly; smaller businesses file quarterly or annually. The CDTFA assigns your filing schedule when you register.
Local Business Taxes
California doesn’t have a uniform statewide local business tax, but most cities and counties have their own business license tax — and many are based on gross receipts.
San Francisco has one of the most aggressive local business taxes in the state: a gross receipts tax with rates ranging from 0.053% to 0.65% depending on industry. Retail, services, and financial services all face different rates. There’s also a payroll expense tax for businesses above certain thresholds.
Los Angeles charges a gross receipts tax ranging from $1.01 to $5.07 per $1,000 in gross receipts depending on business classification. A business grossing $500,000 in the “retail” category owes roughly $1,500 in city business tax.
Smaller cities vary widely. Some charge a flat annual fee ($50–$200). Others have tiered gross receipts structures.
The short version: check with your city and county when you form your LLC. Business license requirements and local taxes are separate from what you owe the state. Most cities make this information available on their finance or business services department websites.
Putting It All Together: What a California LLC Actually Pays
Here’s a rough picture for a single-member LLC in Los Angeles with $150,000 in net profit:
- $800 — California franchise tax (flat, mandatory)
- $0 — Gross receipts fee (under $250K threshold)
- ~$9,700 — Self-employment tax (federal, estimated)
- ~$10,200 — California state income tax (estimated, single filer)
- ~$1,500 — Los Angeles city business tax (estimated, varies by classification)
- Federal income tax — depends on your full tax picture
That’s before federal income tax. California LLC ownership is not cheap.
For a business crossing $250,000 in gross receipts, add another $900. Cross $500,000, add $2,500. The fees stack.
This is why some California business owners form their LLC in another state (Nevada, Wyoming, Delaware) and then register as a foreign LLC in California. Spoiler: it doesn’t actually eliminate the $800 franchise tax. If you’re doing business in California, California expects its money.
FAQ
Does California have a franchise tax for LLCs?
Yes — and it’s unavoidable. California charges every LLC a minimum $800 per year to the Franchise Tax Board, regardless of revenue or profit. This is due even if your LLC earns nothing. There is no way to elect out of it. The only real exemption was for LLCs formed between 2021–2023 (first-year waiver), which has expired.
When are California LLC taxes due?
The $800 franchise tax is due on the 15th day of the 4th month after your LLC’s formation date, and then every April 15 after that. California state income tax for pass-through LLCs flows to your personal return, also due April 15 (with automatic extension available to October 15). Quarterly estimated payments are due April 15, June 15, September 15, and January 15.
Should my LLC elect S-Corp status in California?
Maybe — but the math is different in California than in other states. The S-Corp election can reduce your self-employment tax burden, but it doesn’t eliminate the $800 franchise tax. California also charges S-Corps a 1.5% net income tax (minimum $800). The election generally makes sense if you’re netting $40,000+ annually, but run the numbers with an accountant first. The added complexity has real costs.
What is the California gross receipts fee for LLCs?
It’s a tiered annual fee on top of the $800 franchise tax. LLCs with gross receipts under $250,000 pay nothing extra. Between $250K–$499K, it’s $900. Between $500K–$999K, it’s $2,500. Between $1M–$4.99M, it’s $6,000. Above $5M, it’s $11,790. These are in addition to, not instead of, the base franchise tax.
Do I pay California income tax on LLC earnings?
Yes, for pass-through LLCs (single-member and partnership). Your share of LLC income shows up on your personal California return and is taxed at rates ranging from 1% to 13.3%. California has the highest top marginal income tax rate in the country. If you expect to owe $500 or more in state taxes, quarterly estimated payments are required.
Does forming my LLC in Nevada or Delaware avoid California taxes?
No. If you’re operating in California — employees here, clients here, or you personally work here — California considers your LLC to be doing business in the state. You’ll need to register as a foreign LLC with the California Secretary of State and pay all the same taxes, including the $800 franchise tax. Out-of-state formation only helps if you’re genuinely operating outside California.
The Bottom Line
California is expensive for LLCs. The $800 franchise tax is the headline cost, but the gross receipts fee, high income tax rates, and local business taxes add up fast. None of this means you shouldn’t form an LLC in California — the liability protection and credibility are worth it. But go in with clear numbers.
The most important thing you can do: work with a California CPA, not a generic online tax service. California’s tax rules are specific enough that general advice regularly costs people money. The consultation fee pays for itself.
To form your LLC or look up your existing entity, use the Secretary of State’s portal at bizfileonline.sos.ca.gov.