Franchise Taxes for LLC in California
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Do You Have to Pay the $800 California LLC Fee the First Year?
In this article, we discuss the applicable taxes and fee requirements for limited liability companies (LLCs) operating in the state of California.
Obligation to Pay Franchise Tax
California, like many other states, charges a fixed franchise tax each year for LLCs operating in the state. The amount of the franchise tax is $800. All LLCs, both those organized in California and those foreign LLCs registered to do business within California, must pay this tax.
When are Franchise Taxes Due?
The business must file form 3522 and pay $800 by the 15th day of the 4th month after the LLC is approved by the secretary of state’s office. So, if a business is approved in January, the fee will be due by the 15th day of May. January is counted as the approval month. February, March, and April are months 1, 2, and 3 after approval. So, the 15th day of May is when the taxes are due.
The next year’s annual franchise taxes are due by April 15th, the state income tax filing deadline for individuals. If an LLC is approved late in the year, two $800 payments might come in quick succession. For example, if the LLC is approved in October of 2018, then your first $800 payment will be due by January 15th, 2019. This payment covers the franchise taxes for the 2018 tax year, even though the LLC only existed a few months in 2018. The next payment of $800 payment, is due by April 15th, 2019. This 2nd $800 payment pays the applicable franchise taxes for the 2019 tax year.
What other Taxes and Fees are Due?
California charges a state fee of $70 at the time of organizing the LLC. This basically covers the cost of filing the LLC-1, which petitions to bring the LLC into existence. Then, the LLC must file a Statement of Information every two years. This statement reaffirms that the information for the LLC filed with the state is accurate. The filing fee for the statement of information is $20.
LLCs are also subject to a state fee (really a tax) on the level of income produced from operations within the state. The schedule is as follow:
Less than $250K annually = $0
$250K - $499,999 = $900
$500K - $999,999 = $2,500
$1M - $4,999,999 = $6,000
$5M+ = $11,790
Remember, this fee is in additional to the previously mentioned taxes and fees. These fees are assessed based upon the applicable fiscal year. Most LLC follow the calendar year for tax purposes, but the entities may elect an alternative fiscal year. If so, these fees apply for the elected fiscal year.
If you believe that you will make more than $250K in a given year, you should pay estimated fees to avoid a penalty at the end of the year. To pay estimated fees, file for 3536 and make a payment based upon the company’s estimated earnings