Forming an LLC in California: What It Actually Costs and Why the $800 Catches People Off Guard

California's LLC filing fee looks cheap. The ongoing cost is not. Here's what actually determines whether California is the right state to form in, and what to budget for once your LLC exists.

The filing fee is $70 — that's the easy part

You form a California LLC by filing Articles of Organization with the Secretary of State. The fee is $70, and online filing is typically processed quickly. That's the last cheap number in this article.

The number that matters: $800 a year, minimum

Every LLC organized in California, registered to do business in California, or actively doing business in California owes an $800 annual franchise tax under California Revenue & Taxation Code §17941 — regardless of revenue. A California LLC that made zero dollars in a given year still owes $800. There's no proration for a slow year and no exemption for being a side project.

The first payment is due by the 15th day of the 4th month after formation, with subsequent payments due every April 15. (There was a first-year waiver under AB 85 for LLCs formed 2021–2023; that waiver expired for LLCs formed on or after January 1, 2024 — confirm current-year treatment with the Franchise Tax Board before assuming you're exempt.)

If your LLC's California-sourced gross income (plus cost of goods sold, in some calculations) exceeds $250,000, a second, separate graduated LLC fee kicks in under §17942 — ranging roughly from $900 to $11,790 depending on revenue tier. This is filed on Form 3536 and is in addition to, not instead of, the $800 franchise tax.

You'll also file a Statement of Information ($20) within 90 days of formation and every two years after.

What this means in practice

A California LLC with no revenue at all still costs roughly $890 in year one and $800+ every year after — before a registered agent, an accountant, or anything else. That's a real number to run against your first-year budget, especially for a solo founder testing an idea. Some founders form in a cheaper state (Texas or Delaware) and then register California as a "foreign LLC" if they're not yet doing business here — but if you're actually operating in California, that generally doesn't avoid the $800; it just adds a second state's paperwork.

Common mistakes

• Assuming no revenue means no tax owed. It doesn't. The $800 is a flat franchise tax, not an income tax.
• Missing the Statement of Information deadline. The Secretary of State can suspend an LLC that goes roughly two years without filing it, and a suspended LLC can't sue, defend a lawsuit, or enforce a contract in California courts until it's reinstated.
• Forgetting the graduated fee applies on top of, not instead of, the $800 once you cross the $250,000 revenue threshold.
• Not budgeting for double payments in year two. Depending on your formation date, some LLCs face two franchise tax payments close together in their early years — plan cash flow accordingly.

What California gives you in exchange

Strong LLC case law, a large talent and investor pool, and — for many founders — the simple fact that you're already operating here, which makes "form somewhere cheaper" mostly a paperwork shuffle rather than a real savings.

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Forming or maintaining a California LLC? Talking Tree's LLC Formation Guide and attorney-drafted Operating Agreement templates are available in Cedar, and Find Counsel can connect you with a California business attorney for anything more complex.

This article is for general informational purposes only and does not constitute legal or tax advice. Fees and thresholds change — confirm current figures with the California Secretary of State and Franchise Tax Board before filing.