California Franchise Tax: Rates, Deadlines, and Penalties

The California franchise tax is the state’s annual charge on business entities for the privilege of existing or doing business in California, with a $800 minimum that every corporation, LLC, limited partnership, and limited liability partnership owes regardless of profit. The California Franchise Tax Board (FTB) administers it, and the penalties for ignoring it reach well past a late fee: the state can suspend your entity, void its contracts, and block it from suing or defending itself in court.¹

Who Owes the Tax

C-corporations, S-corporations, LLCs, limited partnerships, and limited liability partnerships all owe the tax if they are incorporated, registered, or doing business in California.² Where the entity was formed does not matter. A Delaware corporation selling into California can owe the tax just as easily as one headquartered in Los Angeles.

Under Revenue and Taxation Code Section 23101, a business is “doing business” in California if it actively engages in any transaction for financial gain in the state, or if it crosses any of three factor-based thresholds covering California sales, property, or payroll.³ For 2025, the triggers are approximately $757,070 in California sales, $75,707 in California property, or $75,707 in California payroll.⁴ Exceeding any single threshold is enough. The FTB adjusts these amounts for inflation each year.

One boundary worth flagging: a separate corporate income tax applies to corporations that earn California-source income but do not meet the “doing business” test and are not registered in the state. The rate is the same, but the $800 minimum does not apply.⁵ If you are registered with the Secretary of State or you cross the thresholds, you are in franchise tax territory and the $800 floor is on the table.

How Much You Pay

C-Corporations

C-corporations pay 8.84% of net California-source income, or $800, whichever is higher.⁶ A corporation that lost money still owes $800. One with enough income to push the calculation past $800 pays the larger figure.⁷ Inactive corporations that never formally dissolved still owe the $800 each year.

S-Corporations

S-corporations pay 1.5% on net California-source income, with the same $800 minimum.⁸ The lower rate reflects that S-corporation income generally passes through to shareholders for personal income tax purposes.

First-Year Waiver for New Corporations

California waives the $800 minimum for newly formed or newly qualified corporations during their first taxable year. Both C-corporations and S-corporations qualify. The income-based tax still applies to any first-year net income at the standard rate.⁸ Incorporate in October and earn nothing before year-end, and you owe zero for that first year. The $800 minimum kicks in starting in year two, revenue or no revenue.

LLCs: $800 Plus a Gross Receipts Fee

LLCs registered or doing business in California pay an $800 annual tax under Revenue and Taxation Code Section 17941, whether or not they conduct any business during the year.⁹ The temporary first-year waiver that existed for LLCs formed between January 1, 2021, and December 31, 2023, under Assembly Bill 85 has expired. LLCs formed in 2024 or later owe the $800 starting in year one.

LLCs with total California-source income of $250,000 or more pay an additional fee on top of the $800, in tiers:¹⁰

$250,000 to $499,999: $900
$500,000 to $999,999: $2,500
$1,000,000 to $4,999,999: $6,000
$5,000,000 or more: $11,790

An LLC pulling in $1.2 million in California-source income owes $6,800 total: the $800 annual tax plus the $6,000 fee. The estimated fee is due by the 15th day of the sixth month of the current tax year, which is June 15 for calendar-year LLCs, using Form 3536.¹¹ Any balance is settled when the LLC files its annual return.

Filing Deadlines

Deadlines depend on the entity type and which payment you are making:

Corporations (Form 100): the 15th day of the 4th month after the close of the tax year. That is April 15 for calendar-year filers.⁵
LLC returns (Form 568): the 15th day of the 3rd month after the close of the tax year, or March 15 for calendar-year LLCs.¹¹
LLC $800 annual tax: the 15th day of the 4th month after the beginning of the tax year, or April 15 for calendar-year LLCs.⁹

When a due date falls on a weekend or holiday, it moves to the next business day.

Corporations that miss the original deadline get an automatic extension to the 15th day of the 11th month after the close of the tax year (November 15 for calendar-year filers), with no written request required.⁵ LLCs and partnerships get an automatic six-month extension. The extension covers filing, not paying. Your full estimated tax must be paid by the original due date or penalties and interest start running.¹²

Corporations expecting to owe more than $800 generally must make estimated tax payments on an uneven quarterly schedule: 30% in the first quarter, 40% in the second, nothing in the third, and 30% in the fourth.¹³ Underpaying triggers its own penalty, separate from late filing or payment penalties.

How to File and Pay

Corporations file Form 100. LLCs file Form 568. Both are on the FTB website, and you will need your Secretary of State file number and federal employer identification number along with your California-source income records.¹⁴ California law requires any business entity that uses tax preparation software to file electronically, which covers nearly every business with a preparer.¹⁵ Payments can go through the FTB’s free Web Pay system straight from a bank account, or by credit card with a processing fee.¹⁶ Paper filing remains available for the shrinking pool of hand-prepared returns.

Penalties, Interest, and Suspension

Missed deadlines get expensive fast, and the penalties stack:

Late filing: 5% of unpaid tax per month or partial month the return is overdue, capped at 25%.¹⁷
Late payment: 5% of unpaid tax plus 0.5% for each month the payment stays late, combined cap of 25%.¹⁸
Demand penalty: if the FTB sends a formal demand letter and you still do not file, the penalty jumps to 25% of total tax due.¹⁷

Interest runs on unpaid balances from the original due date until payment. The FTB business underpayment rate for the first and second halves of 2026 is 7%, compounded daily. The FTB does not waive interest even when it waives a penalty.

Keep ignoring the bills and the FTB will suspend or forfeit your entity. The Secretary of State can also suspend independently for a missing Statement of Information. A suspended entity loses real ground:¹

It cannot file a lawsuit or defend itself in court. Judges dismiss claims brought by suspended businesses.
Contracts entered into during suspension are voidable by the other party. Enforcement requires applying for Relief from Contract Voidability at $100 per day, capped at the tax owed.
It cannot sell, transfer, or exchange real property.
It cannot formally close. You have to revive it first, which means paying every back tax, penalty, and interest charge.

This traps many owners. Walking away from a dormant business does not stop the tax. The $800 keeps accruing every year until you formally dissolve or cancel the entity. Five idle years mean $4,000 in minimum tax alone before penalties and interest, all owed before you can even start the shutdown paperwork.¹

How to Stop the Tax by Closing the Business

The only way to stop the tax from accruing is to formally dissolve (corporations), surrender (foreign entities), or cancel (LLCs and partnerships) with both the FTB and the Secretary of State. The steps:¹⁹

File all delinquent returns and pay every outstanding balance, penalty, and interest charge.
File a final tax return for the current year, marking “final” on the first page and checking the applicable Final Return box.
Stop doing business in California after the final taxable year.
File dissolution or cancellation paperwork with the Secretary of State within 12 months of the final tax return.

If your entity is already suspended, revivor comes first: file all missing returns, pay all balances, and submit a revivor request (FTB 3557 BC for corporations, FTB 3557 LLC for LLCs). Once the FTB restores good standing, you can move on to dissolution or cancellation.¹ If you are not actively using a California entity, close it now rather than letting the bill grow.

1
State of California Franchise Tax Board. My Business Is Suspended
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State of California Franchise Tax Board. Corporations
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Justia. California Revenue and Taxation Code 23101-23114
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State of California Franchise Tax Board. Doing Business in California
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State of California Franchise Tax Board. 2025 Instructions for Form 100 Corporation Tax Booklet
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State of California Franchise Tax Board. Business Tax Rates
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California Legislative Information. California Revenue and Taxation Code 23153
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State of California Franchise Tax Board. S Corporations
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State of California Franchise Tax Board. Limited Liability Company
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California Legislative Information. California Revenue and Taxation Code 17942
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State of California Franchise Tax Board. Due Dates: Businesses
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State of California Franchise Tax Board. Payment for Automatic Extension for Corporations and Exempt Organizations
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State of California Franchise Tax Board. Estimated Tax Payments
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State of California Franchise Tax Board. Tax News April 2023
15
State of California Franchise Tax Board. e-File for Business
16
State of California Franchise Tax Board. Pay by Bank Account (Web Pay)
17
State of California Franchise Tax Board. Common Penalties and Fees
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State of California Franchise Tax Board. FTB Pub. 1024 Penalty Reference Chart
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State of California Franchise Tax Board. Closing a California Business Entity