A California LLC pays an $800 annual minimum franchise tax plus personal income tax up to 13.3%. The IRS default treatment is pass-through: single-member LLCs are disregarded entities, multi-member LLCs are partnerships. An S-corp election can cut self-employment tax once net income passes about $40,000-$60,000. Non-resident owners of a foreign-owned single-member LLC file Form 5472 with a pro-forma 1120 each year.
A California LLC is a federal pass-through by default and pays an $800 annual minimum franchise tax to California plus personal income tax up to 13.3%. Profits flow to the owners' personal returns rather than an entity-level income tax. Single-member LLCs are disregarded entities taxed on Schedule C; multi-member LLCs file Form 1065 and issue K-1s. On top of the $800 floor, California adds a graduated LLC fee once California-sourced income passes $250,000. An LLC can elect S-corporation or C-corporation treatment when that lowers total tax. The $800 minimum is the price of the LLC existing in California and is owed under any classification, including an S-corp or C-corp election. Federal treatment changes how profit is taxed; it does not remove California's annual floor.
By default the IRS taxes a single-member California LLC as a disregarded entity, reported on Schedule C of the owner's personal 1040, and a multi-member LLC as a partnership that files Form 1065 and issues K-1s. Neither default carries a federal entity-level income tax; profit passes through to the members. The default holds until the LLC files an election. An LLC changes its federal classification with IRS Form 2553 for S-corporation treatment or Form 8832 for C-corporation treatment, and the California $800 franchise tax applies under either election.
Every California LLC owes an $800 minimum franchise tax to the Franchise Tax Board each year, regardless of income or activity. It applies even in years the LLC earns nothing. The first payment is due by the 15th day of the fourth month after formation, and each subsequent payment by April 15. The $800 is separate from personal income tax, which reaches 13.3% on pass-through income. This annual floor is the defining cost of a California LLC and the main reason low-revenue founders form in New Mexico, which charges no annual fee. A California LLC formed in December still owes the $800 for that short first year, so timing the formation late in the year does not avoid the charge. New Mexico, by contrast, carries no annual report and no annual state fee at all.
Yes. On top of the $800 franchise tax, California charges a graduated LLC fee once total California-sourced income reaches $250,000. The fee rises with income. The schedule runs $900 from $250,000 to $499,999, $2,500 from $500,000 to $999,999, $6,000 from $1,000,000 to $4,999,999, and $11,790 at $5,000,000 and above. The LLC fee is based on gross income, not net profit, so a high-revenue, low-margin business owes it regardless of profitability. This is the second layer of California-specific cost after the $800 minimum. Because the fee tracks gross income rather than profit, a business with $1,000,000 in revenue and thin margins still owes the $6,000 tier. Planning for the LLC fee matters most for high-volume, low-margin operations.
An S-corp election becomes worthwhile once net business income passes about $40,000-$60,000 per year. The reasonable-salary portion of income avoids self-employment tax, saving 15.3% on the non-salary distribution. An LLC elects S-corporation treatment by filing IRS Form 2553. Below the $40,000-$60,000 range, payroll compliance costs outweigh the self-employment tax savings. California adds a 1.5% entity-level tax on S-corp net income (a $800 minimum), so the California math differs from a no-income-tax state. A US tax preparer runs the breakeven before the election. The election also requires running payroll, filing quarterly employment returns, and issuing a W-2 to the owner, which adds accounting cost. The savings on self-employment tax must clear that overhead before the S-corp election pays off.
Yes. Default LLC owners pay 15.3% self-employment tax on net business income: 12.4% Social Security up to $168,600 plus 2.9% Medicare with no ceiling. Electing S-corporation treatment via Form 2553 splits income into a reasonable salary (subject to payroll tax) and distributions (not subject to self-employment tax), which reduces the total once net income passes about $40,000-$60,000. The tradeoff is payroll compliance: the owner runs payroll, files quarterly, and issues a W-2. Anonymousllc.co partners with US tax preparers who model the salary split. The 2.9% Medicare portion has no income ceiling, so it applies to every dollar of net business income under the default classification. The Social Security portion stops at the $168,600 wage base.
Non-resident US tax depends on Effectively Connected Income. A foreign-owned LLC with no US ECI owes no US income tax but must file Form 5472 with a pro-forma Form 1120 each year; a US-source ECI triggers US income tax. A multi-member LLC files Form 1065 and issues K-1s to the members. An ITIN ($299) may be needed for personal US tax filing, and California may require a nonresident withholding filing on California-source income. Anonymousllc.co partners with US tax preparers familiar with non-resident filings and coordinates the ITIN when the return requires one. Whether a non-resident owes US income tax turns on Effectively Connected Income, not on where the LLC is registered. A California LLC with no US-source ECI files the information returns but owes no US income tax on foreign-earned profit.
Form 5472 is an information return required for any US disregarded entity with 25% or more foreign ownership. Most non-resident-owned single-member California LLCs file it annually alongside a pro-forma Form 1120. The form reports reportable transactions between the LLC and its foreign owner, and the penalty for not filing starts at $25,000. It is an information return, not an income tax return, so filing it does not by itself create a US income tax bill. Anonymousllc.co connects non-resident owners with preparers who file Form 5472 and the pro-forma 1120 on schedule. The filing is due with the pro-forma 1120 by the standard corporate deadline, and an extension is available on request. Missing it carries the $25,000 penalty even when no income tax is owed.
Under the March 21, 2025 FinCEN interim final rule, domestic reporting companies are exempt from BOI reporting. Foreign reporting companies formed outside the US remain obligated. Most California LLCs are domestic and currently exempt. A California LLC formed in the US falls under the domestic exemption, so no BOI report is due for it under the current rule. A foreign-formed entity registering to do business in the US remains a foreign reporting company and files each report at $150 through Anonymousllc.co. The rule continues to evolve, so status is confirmed at filing time. A US-formed California LLC that later registers a foreign entity into the US would then test the foreign-reporting-company rule for that entity, not for the California LLC itself.
Only where the business has no California nexus. An LLC doing business in California owes the $800 franchise tax and California income tax on California activity whether formed in California or foreign-qualified from another state. Where a founder has no California operations, forming in New Mexico ($347 all-in, no annual fee) or Wyoming ($397 all-in, no state income tax) avoids the $800 franchise tax entirely. A Wyoming anonymous LLC foreign-qualified into California keeps ownership private while the franchise tax still applies to California income. Full state comparison lives on the California LLC cost page. Forming in Wyoming or New Mexico avoids the $800 franchise tax only when the business has no California nexus. Once a California office, employees, or storefront exists, the franchise tax and California income tax apply to that activity regardless of formation state.
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