California LLC: The $800 Annual Tax and Form 568
California LLCs can owe the $800 annual tax before earning revenue. Learn Form 568, first-year rules, LLC fees, deadlines, and the 2027 change.
The Short Answer
Yes. Evan generally owes California’s $800 annual LLC tax for 2024 even though his new LLC has not yet received client revenue.
For an LLC subject to California’s Form 568 rules, the annual tax is generally tied to being organized, registered, or doing business in California—not to reaching a minimum amount of revenue or profit.
California temporarily waived the first-year $800 annual tax for qualifying LLCs whose first taxable years began in 2021 through 2023.
Evan forms his LLC in February 2024.
The temporary exemption has already expired.
So a new California LLC beginning its first taxable year in 2024—and likewise in 2026—generally faces the regular $800 annual tax.
1. Why Does Evan Owe $800 Before Earning Revenue?
California’s annual LLC tax is not calculated from net profit.
An LLC generally becomes subject to the tax if it is doing business in California or is organized or registered with the California Secretary of State.
That means Evan’s LLC can owe the annual tax even though it has not collected a client payment and the only money in its bank account came from Evan himself.
For Evan, the sequence is simple:
He created the California LLC.
The annual tax came with it.
California also generally continues imposing the annual tax until the LLC is properly cancelled.
2. Why Did Old Articles Say the First Year Was Free?
Because they were once correct.
California created a temporary exemption from the $800 annual tax for the first taxable year of qualifying LLCs beginning on or after January 1, 2021 and before January 1, 2024.
The timeline is:
2021–2023
→ qualifying first taxable year: $0
2024–2026
→ first taxable year: generally $800
Evan forms his LLC in 2024, so he falls just outside the old exemption period.
That is why the articles he finds in the Episode are misleading rather than necessarily wrong.
The rule changed.
The articles did not.
3. When Is the $800 Due?
For a newly formed domestic California LLC, the first annual tax is generally due by the 15th day of the fourth month after the LLC is formed or registered.
Evan forms his LLC in February 2024.
His first annual tax would therefore generally have been due:
May 15, 2024
For later calendar years, the annual tax is generally due April 15.
FTB 3522 is the LLC Tax Voucher used when making the annual-tax payment by mail. California also permits electronic payment.
The important distinction is:
FTB 3522
→ annual LLC tax payment
Form 568
→ California LLC tax return
They are related, but they are not the same filing.
FTB — LLC Filing Requirements and Payment Timing
4. Why Does Evan Still File Form 568?
Because federal disregarded-entity treatment does not eliminate California’s LLC filing requirement.
Evan’s single-member LLC may be disregarded for federal income-tax purposes, with the underlying consulting activity generally reported on his Schedule C.
California still generally requires the SMLLC to file Form 568.
FTB specifically states that an SMLLC must file Form 568 even though it is considered a disregarded entity for tax purposes. The LLC also remains subject to the annual tax and, when applicable, the separate LLC fee.
For an individual-owned calendar-year SMLLC, Form 568 is generally due on April 15 following the end of the taxable year.
So Evan’s 2024 Form 568 would generally be due:
April 15, 2025
California provides an automatic extension of time to file in applicable situations, but an extension to file does not postpone taxes or fees that were already due.
5. The $800 Tax and the LLC Fee Are Different
The $800 annual LLC tax should not be confused with California’s separate LLC fee.
For Evan’s 2024 LLC, the annual tax is generally:
$800
The LLC fee does not begin until total California annual income reaches $250,000.
The current fee amounts are:
$250,000–$499,999
→ $900
$500,000–$999,999
→ $2,500
$1,000,000–$4,999,999
→ $6,000
$5,000,000 or more
→ $11,790
The fee is based on California annual income determined under the LLC-fee rules, not simply the LLC’s net taxable profit.
Evan expects only about $25,000 of consulting revenue.
So the income-based LLC fee is not his immediate problem.
The $800 annual tax is.
If an LLC expects to owe the fee, it generally estimates and pays it using FTB 3536 by the 15th day of the sixth month of the taxable year.
California R&TC §17942 — LLC Fee
6. Was Evan Right to Put the $800 Under “Taxes and Licenses”?
Generally, that is a reasonable federal tax treatment for a Schedule C business when the state tax or fee is directly attributable to the business.
Current IRS guidance allows a Schedule C taxpayer to deduct various state and local taxes directly attributable to the business, and Schedule C line 23 is used for qualifying taxes, licenses, and regulatory fees.
Because Evan’s LLC is disregarded for federal income-tax purposes, qualifying expenses of the LLC generally flow into the underlying business reporting rather than producing a separate federal LLC income-tax return.
So Evan’s spreadsheet entry:
California annual LLC tax
→ Taxes and licenses
is directionally consistent with the federal Schedule C framework.
As with any deduction, the actual treatment depends on the nature of the payment and the underlying business facts.
IRS — Publication 334, Tax Guide for Small Business
IRS — Instructions for Schedule C, Line 23
7. What Happens If the LLC Is Closed?
Simply stopping client work or closing the business bank account does not necessarily end the California annual-tax obligation.
California generally requires the appropriate final return and cancellation process.
There is a narrow short-form cancellation procedure for certain California LLCs cancelled within 12 months of formation. An LLC must satisfy specific requirements, including restrictions on conducting business, to qualify.
So short-form cancellation is not a general way to operate an LLC and later erase the $800 annual tax.
For an operating LLC, properly ending the entity matters because remaining open into another taxable year can create another annual-tax obligation.
FTB — Closing a California LLC
8. What Changes After 2026?
California changed the first-year rule again in 2026.
Under current enacted law, for taxable years beginning on or after January 1, 2027 and before January 1, 2030, the annual tax for a qualifying LLC’s first taxable year is reduced from $800 to:
$400
So the current timeline is:
2021–2023
→ qualifying first taxable year: $0
2024–2026
→ first taxable year: generally $800
2027–2029
→ first taxable year: generally $400
The 2027 rule is a reduction.
It is not a return of the old first-year exemption.
And it does not change Evan’s 2024 result.
California FTB — 2026 Legislative Changes
California R&TC §17941 — Annual LLC Tax
Common Mistakes
“My LLC made no money, so I do not owe the $800.”
Generally incorrect. The annual tax is not based on net profit.
“New California LLCs get the first year free.”
That is outdated for LLCs beginning their first taxable year during 2024–2026.
“The $250,000 threshold determines whether I owe the $800.”
No. The $250,000 threshold relates to the separate LLC fee.
“The LLC fee is based on net profit.”
Generally no. California applies its special annual-income rules.
“FTB 3522 and Form 568 are the same thing.”
No. FTB 3522 relates to the annual-tax payment. Form 568 is the California LLC return.
“If I stop using the LLC, the annual tax automatically stops.”
Not necessarily. Proper final filing and cancellation matter.
The Key Distinction
Evan needs to separate three California rules.
1. Annual LLC tax
For his 2024 LLC:
$800
This can apply even before the LLC earns revenue.
2. Form 568
His disregarded SMLLC generally still has its own California filing requirement.
3. LLC fee
This is a separate charge that generally begins once California annual income reaches $250,000.
For Evan, the first two matter now.
The broader lesson is simple:
Federal tax law can disregard Evan’s LLC for income-tax purposes while California still treats the LLC as having its own filing and payment obligations.
Reference
California FTB — Limited Liability Company
Current FTB guidance on California’s $800 annual LLC tax, Form 568, the LLC fee, the historical first-year exemption, and LLC cancellation.
California FTB — Limited Liability Company
California FTB — Single Member LLC
Current guidance for disregarded single-member LLCs, including Form 568 filing requirements, the annual LLC tax, and the LLC fee.
California FTB — Single Member LLC
California Revenue and Taxation Code §17941
Statutory authority for California’s annual LLC tax, including the prior 2021–2023 first-year exemption and the enacted first-year $400 rule for 2027–2029.
California R&TC §17941
California Revenue and Taxation Code §17942
Statutory authority for the separate California LLC fee that begins when California annual income reaches the applicable threshold.
California R&TC §17942
California FTB — What’s New
Current FTB update reflecting the first-year annual tax reduction to $400 for qualifying LLCs beginning their first taxable year in 2027–2029.
California FTB — What’s New
IRS — Publication 334, Tax Guide for Small Business
Current federal guidance on Schedule C business expenses, including certain state and local taxes directly attributable to a business.
IRS — Publication 334
IRS — Instructions for Schedule C
Current filing instructions for Schedule C, including the treatment of qualifying taxes and licenses.
IRS — Instructions for Schedule C
See This Rule in the Story
Episode 03 — The $800 Tax
Evan forms his California LLC and starts separating the business from his personal finances.
Then he finds articles saying new California LLCs do not owe the $800 annual tax in their first year.
The articles were once right.
The dates are not.
Related Tax Guide
Does an LLC Automatically Save Taxes?
Before the $800 bill appears, Evan first has to understand why forming an LLC and choosing a federal tax classification are two different decisions.
Money Meets Tax provides general educational information and is not individualized tax, legal, accounting, investment, or financial advice. Tax laws and guidance change, and the treatment of any transaction depends on the applicable law and specific facts. See the full Disclaimer.