California Franchise Tax: Rates, Deadlines, and Penalties

California’s franchise tax is the annual charge every corporation, LLC, limited partnership, and limited liability partnership pays for the privilege of existing or doing business in the state, with a floor of $800 per year whether the entity earns a dollar or loses money. The Franchise Tax Board (FTB) collects it, and the consequences for skipping it reach well past a late fee: suspension, loss of the right to sue or defend in court, and voidable contracts.¹

Who Owes It

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

Revenue and Taxation Code Section 23101 defines “doing business” broadly. An entity qualifies if it actively engages in any transaction for financial gain in California, or if it crosses any of three annually adjusted thresholds covering sales, property, or payroll.³ For 2025, the triggers sit at roughly $757,070 in California sales, $75,707 in California property, or $75,707 in California payroll.⁴ Crossing any single threshold is enough.

One boundary worth noting: California also has a separate corporate income tax for corporations that earn California-source income but are not “doing business” in the state. The rate matches the franchise tax rate, but the $800 minimum does not apply.⁵ If you are registered with the Secretary of State or meet the doing-business thresholds, you are in franchise tax territory and the floor applies.

How Much You Owe

C-Corporations

C-corporations pay 8.84% of net California-source income, or $800, whichever is greater.⁶ A corporation that loses money still owes the $800.⁷ The minimum also applies to inactive corporations that have not formally dissolved.

S-Corporations

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

LLCs: $800 Plus a Gross Receipts Fee

LLCs registered or doing business in California pay the $800 annual tax under Revenue and Taxation Code Section 17941, whether or not they conduct business during the year.⁹ A prior waiver for LLCs formed between January 1, 2021, and December 31, 2023, has expired. LLCs formed in 2024 or later owe the $800 starting in year one with no waiver.

On top of the $800, LLCs with California-source income of $250,000 or more pay a tiered gross receipts fee: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 earning $1.2 million in California-source income owes $6,800 total: the $800 tax plus the $6,000 fee. The estimated fee is due by the 15th day of the 6th month of the current tax year (June 15 for calendar-year LLCs) on Form 3536.¹¹

The First-Year Break for New Corporations

California waives the $800 minimum for newly formed or newly qualified C-corporations and S-corporations during their first taxable year. Income-based tax still applies to any first-year net income at the standard rate.⁸ Incorporate in October and earn nothing before December 31, and you owe zero for year one. Starting in year two, the $800 applies regardless of revenue. No equivalent waiver exists for LLCs anymore.

When to File and Pay

Due dates depend on the entity and whether you are filing the return or paying the annual tax:

Corporations (Form 100): the 15th day of the 4th month after the close of the tax year, which 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, which is March 15 for calendar-year LLCs.¹¹
LLC annual tax ($800): the 15th day of the 4th month after the beginning of the tax year, which is April 15 for calendar-year LLCs.⁹

If a due date falls on a weekend or holiday, you get until the next business day.

Corporations that cannot file by the deadline receive an automatic extension to the 15th day of the 11th month after year-end (November 15 for calendar-year filers), with no written request required.⁵ LLCs and partnerships get a similar six-month automatic extension. The extension covers filing only. You still must pay your full estimated tax by the original due date or face penalties and interest.¹²

Corporations expecting to owe more than $800 generally make quarterly estimated payments on an uneven schedule: 30% in Q1, 40% in Q2, nothing in Q3, and 30% in Q4.¹³ Underpayment triggers its own separate penalty.

How to File and Pay

Corporations file Form 100. LLCs file Form 568. Both are on the FTB website along with the related schedules and payment vouchers.¹⁴ You will need your California Secretary of State file number, your federal employer identification number, and records of your California-source income.¹⁵

Any business entity that prepares its return using tax preparation software must file electronically under California law.¹⁶ That covers nearly every business with a tax preparer. The FTB’s free Web Pay system pulls payments directly from a checking or savings account.¹⁷ Credit card payments work but carry processing fees. Paper filing remains an option for hand-prepared returns.

Penalties and Interest

Missing deadlines gets costly fast, and the penalties stack:

Late filing: 5% of unpaid tax per month or partial month overdue, up to 25%.¹⁸
Late payment: 5% of unpaid tax plus 0.5% for each month the payment remains late, capped at a combined 25%.¹⁹
Demand penalty: if the FTB sends a formal demand letter and you still don’t file, 25% of total tax due regardless of timing.¹⁸

Interest accrues daily on any unpaid balance. The FTB business underpayment rate for the first and second halves of 2026 is 7%, compounding daily, running from the original due date until paid in full. The FTB will not waive interest even when it waives a penalty.

What Suspension Actually Means

If you ignore returns or payments long enough, the FTB will suspend or forfeit your entity. The Secretary of State can suspend independently for a missing Statement of Information. The practical effects are the same, and they are severe:¹

No legal standing. A suspended entity cannot bring a lawsuit or defend one. Courts dismiss claims brought by suspended businesses.
Voidable contracts. Any contract signed during suspension can be voided by the other party. To cure this, the entity must apply for Relief from Contract Voidability at $100 per day, up to a cap equal to the tax owed.
No property transfers. The entity cannot sell, transfer, or exchange real property.
No dissolution. You cannot formally close a suspended business until you revive it, which means paying all back taxes, penalties, and interest first.

This is where owners get trapped. Walking away from a dormant entity does not stop the tax. The $800 keeps accruing every year until you formally dissolve or cancel. An entity left idle for five years runs up $4,000 in minimum tax alone, plus penalties and interest, before you can start the paperwork to shut it down.¹

How to Stop the Tax by Closing the Entity

The only way to stop the clock is to formally dissolve (corporations), surrender (foreign entities), or cancel (LLCs and partnerships) with both the FTB and the Secretary of State. The steps:²⁰

File every delinquent return and pay every outstanding balance, including penalties and interest.
File a final tax return for the current year, marking “final” on the first page and checking the 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 filing the final return.

If your entity is already suspended, you have to revive it first: file all missing returns, pay all balances, and submit a revivor request to the FTB. Only after the FTB restores your entity to good standing can you proceed with 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
3
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
13
State of California Franchise Tax Board. Estimated Tax Payments
14
State of California Franchise Tax Board. Forms and Publications
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State of California Franchise Tax Board. Tax News April 2023
16
State of California Franchise Tax Board. e-File for Business
17
State of California Franchise Tax Board. Pay by Bank Account (Web Pay)
18
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