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California limited liability companies (LLCs) are taxed at the state level in accordance with the following CA LLC Tax Schedule:
California LLC Taxes and Fees (Tax years 2001 - present)
| Total Income (Fiscal year) |
LLC Tax +
| LLC Fee = |
Total CA Taxes |
|---|
| < $250,000 (incl. any loss) |
$800 |
$0 |
$800 |
| $250,000 - 499,999 |
$800 |
$900 |
$1,700 |
| $500,000 - 999,999 |
$800 |
$2,500 |
$3,300 |
| $1,000,000 - 4,999,999 |
$800 |
$6,000 |
$6,800 |
| $5,000,000+ |
$800 |
$11,790 |
$12,590 |
The $800 per year minimum annual franchise tax applies to almost all California LLCs and foreign (out of state) LLCs registered to do business in California, for each fiscal year, even if they don't do business or operate at a loss. There is no prorate for partial years, so typically in the last and especially in the first year of operation, the entire $800 is due, even though the operating year may be less than a full year. Exceptions apply for certain short periods of existence during a calendar year where no business activity takes place, for nonprofits with a tax exemption, for certain LLCs solely owned by deployed members of the U.S. Armed Forces, and for LLCs electing S corporation taxation.
Total Income is defined as total revenues from California, subject to some complex definitions in the Revenue and Taxation Code. Prior to 2007, the Franchise Tax Board (FTB) had previously taken the position that it could tax worldwide income of California limited liability companies; however, in Northwest Energetic Services, LLC v. California Franchise Tax Board (2008) 159 CA4th 841, 71 CR3d 642, and Ventas Finance I, LLC v. Franchise Tax Board (2008) 165 CA4th 1207, the courts dealt a blow to the FTB, limiting its LLC fee to those revenues fairly apportioned to California business. LLCs that have overpaid may file a refund claim with the FTB. The $800 per year LLC tax applies regardless of the level of activity in the state, except as noted above.
The LLC tax (which perhaps would have better been named the "LLC fee") is levied for the privilege of doing business in California. It continues to accrue each year, even for "inactive" LLCs, until the dissolution of the LLC.
The LLC fee (which perhaps would have better been named the "LLC tax") is variable and is levied, or not, based on total income for each fiscal year. Most LLCs operate on the calendar year, but some may elect a different fiscal year.
Total California LLC taxes are in addition to any U.S. federal income taxes due. Unlike California corporation taxation*, neither the LLC tax, nor the LLC fee, are dependent on profits. Click here for general LLC information, inculding information about U.S. federal (IRS) taxation of LLCs.
Special COVID-19 Minimum Annual LLC Tax Rule (AB 85):
California Assembly Bill 85 provides for a temporary first-year waiver of the first year annual tax for limited partnerships, limited liability partnerships, and limited liability companies that organize or register with the California Secretary of State in calendar years 2021, 2022, and 2023. * This puts LLCs on par with corporations for their first years in terms on minimal tax. The LLC fee on revenues (see above) continues to apply during these years.
See also:
California LLC formation
LLC or S corporation?
California Franchise Tax Board LLC Tax Information
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