Frequently Asked Questions
Clear, statutory answers backed by California Revenue & Taxation Code, California Corporations Code, and Wyoming Title 17.
Every corporation and LLC incorporated, registered, or doing business in California must pay at least $800 a year, even if unprofitable. New corporations are exempt in their first taxable year.
Under California Revenue and Taxation Code § 23153 (for corporations) and § 17941 (for LLCs), entities doing business in the state are subject to an annual minimum franchise tax of $800.00. This tax is for the privilege of exercising corporate powers within California and is payable to the Franchise Tax Board (FTB) regardless of revenue or operating losses. Corporations that incorporate or qualify in California skip the minimum in their first taxable year under § 23153(f); LLCs formed in 2024 or later have no such exemption.
AB 85 waived the first-year $800 annual tax only for LLCs, LPs and LLPs formed in 2021–2023. Those formed in 2024 or later pay the $800 in year one.
California Assembly Bill 85 (codified for LLCs in Cal. Rev. & Tax Code § 17941(g)) waived the first-year $800 annual tax for LLCs, LPs and LLPs formed or registered between January 1, 2021 and December 31, 2023. The Legislature did not extend it, so those entities formed in 2024 or later owe the $800 in their first taxable year. Corporations were never part of AB 85: they have a separate, permanent first-year exemption from the minimum tax under § 23153(f), but still owe 8.84% (C-corp) or 1.5% (S-corp) on any net income that year.
LLCs pay an additional tiered fee ranging from $900 to $11,790 if total California gross income reaches or exceeds $250,000.
Under Cal. Rev. & Tax Code § 17942, in addition to the $800 annual tax, LLCs must pay an annual fee based on total California gross receipts: $0 under $250k; $900 for $250k–$499k; $2,500 for $500k–$999k; $6,000 for $1M–$4.99M; and $11,790 for $5M or more. This fee must be estimated and paid by the 15th day of the 6th month (June 15 for calendar filers) using Form 3536.
Wyoming charges a $60 minimum tax for assets up to $300,000, or 0.0002 × assets ($2 per $10,000) for assets above $300,000.
Under Wyo. Stat. § 17-16-1630 (corporations) and § 17-29-209 (LLCs), the annual license tax is based strictly on the portion of corporate capital, property, and assets located and employed in Wyoming. For online filers, a $2 state convenience fee applies, bringing the standard minimum to $62.00 total due on the first day of the company’s anniversary month.
No. Wyoming levies no corporate income tax and no personal income tax; the annual license tax on in-state assets is its only entity-level tax.
Wyoming has never enacted a corporate net income tax or an individual income tax, so a Wyoming entity files no state income tax return. The annual report license tax ($60 minimum) is based on assets located in Wyoming, not income. Entities doing business in other states still owe those states' income and franchise taxes.
Yes, if you have remote employees, an office, inventory, or over $757,070 in sales in California (2025 FTB threshold).
Under California Revenue & Taxation Code § 23101, an out-of-state entity has "doing business" nexus in California if it has a physical presence (including remote W-2 workers or leased offices) or meets California factor-based economic thresholds ($757,070 sales, $75,707 payroll, or $75,707 property — latest FTB-published 2025 figures; verify 2026 before filing). Meeting any of these makes you a California taxpayer owing at least the $800 annual tax; a physical presence such as an office or employees usually also requires registering with the Secretary of State.
Yes. A single resident W-2 employee creates physical payroll nexus for an out-of-state company.
California Franchise Tax Board guidance and legal precedent establish that an employee working from home in California constitutes a physical presence of the employer. This triggers the requirement to register with the California Secretary of State ($70 for an LLC, $100 for a corporation) and pay the annual $800 minimum franchise tax.
For the latest FTB-published year (2025): $757,070 sales, $75,707 property, $75,707 payroll, or 25% of your totals.
Under Cal. Rev. & Tax Code § 23101(b), the FTB indexes doing-business thresholds annually. The 2025 published figures are $757,070 in California sales, $75,707 in California real/tangible property, and $75,707 in California payroll compensation, or more than 25% of total sales, property, or payroll. Verify the current year on the FTB doing-business page before relying on a near-the-line number.
$800 via FTB 3522 by April 15; estimated LLC fee via Form 3536 by June 15; Form 568 return by March 15 (multi-member) or April 15 (single-member).
Calendar-year LLCs pay the $800 annual tax by the 15th day of the 4th month (April 15) with voucher FTB 3522 or FTB Web Pay. If total California income will reach $250,000, estimate and pay the LLC fee by the 15th day of the 6th month (June 15) with Form 3536. The Form 568 return is due March 15 for multi-member LLCs and April 15 for single-member LLCs, extendable to October 15, but extensions cover filing only, not payment.
Pay at least 100% of last year's LLC fee by June 15, then no 10% penalty even if this year's fee is higher.
Under Cal. Rev. & Tax Code § 17942(d), underpaying the June 15 Form 3536 estimate costs 10% of the shortfall. The safe harbor: if your June 15 payment equals at least 100% of the fee you owed last year, no penalty applies. Pay the balance with the return. If projected income stays under $250,000, skip Form 3536 entirely.
Late payment: 5% + 0.5%/month (up to 40 months). Late Form 568: $18/member/month (up to $216/member). SOI: $250. FTB demand: 25% plus suspension.
R&TC § 19132 adds 5% of unpaid tax plus 0.5% per month (up to 40 months) for late payment. R&TC § 19172 charges multi-member LLCs $18 per member per month (up to 12 months) for a late Form 568. A missing Statement of Information draws a $250 SOS penalty. Ignoring an FTB demand adds a 25% penalty and can suspend the entity — a suspended LLC cannot sue, defend, or enforce contracts.
A $20 filing to the Secretary of State (Form LLC-12) due within 90 days of forming, then every 2 years in your anniversary window.
The Statement of Information goes to the California Secretary of State, not the FTB, and keeps your registered agent, addresses, and managers current. File Form LLC-12 within 90 days of formation and then every two years inside the six-month window ending with your anniversary month, at bizfileonline.sos.ca.gov. Missing it triggers a $250 penalty and eventual suspension.
Only in a narrow case: a first tax year of 15 days or less with no business done in that window owes nothing for that year.
Under Cal. Rev. & Tax Code § 17946, an LLC whose first taxable year is 15 days or less and that conducts no business during that window owes nothing for that short year. For calendar-year LLCs this effectively means forming on or after December 17 and waiting until January to operate. Related relief: short-form cancellation (SOS LLC-4/8) within 12 months with no business and no debts can avoid the first-year $800 entirely.
File a final Form 568 (check Final Return), stop doing business, then file a Certificate of Cancellation (LLC-4/7) within 12 months.
The $800 accrues every year until the Secretary of State cancels the LLC — going dormant just stacks tax, penalties, and interest. The clean exit: (1) file a final Form 568, check Final Return, and pay the last year's $800 plus any fee; (2) stop doing business in California after that year ends; (3) file a Certificate of Cancellation (LLC-4/7, plus LLC-3 dissolution unless all members voted) within 12 months of the final return. The FTB does not refund earlier years.
Low-margin, high-receipts businesses often pay less as S-corps (1.5% of profit); high-margin businesses often do better as LLCs under the fee tiers.
California taxes S-corps at 1.5% of net income ($800 minimum) with no gross-receipts fee, while LLCs pay $800 plus the § 17942 fee on receipts ($900–$11,790). Example at $1.2M receipts: with $95k profit the LLC owes $6,800 but the S-corp owes ~$1,425; with $600k profit the LLC still owes $6,800 but the S-corp owes ~$9,000. S-corps add payroll requirements and change federal self-employment tax, so model both layers before electing (Form 2553 federally).
Compute both and pay the lower. Few shares favors Authorized Shares; many shares with low assets favors Assumed Par Value.
$400 per year for LLCs/LPs for tax year 2026 onward (up from $300); due June 1. Corporations are unchanged.
Delaware HB 400 raised the LLC/LP annual tax from $300 to $400 beginning with tax year 2026 (registered series $75 → $100; LLP/LLLP per-partner amounts also rose). Corporations still use the Authorized Shares / Assumed Par Value methods. Even inactive LLCs owe the flat tax to stay in good standing.
Wyoming usually wins on state cost alone (~$310 vs ~$2,000 for an LLC over 5 years), but Delaware is expected for most VC raises.
Wyoming charges ~$62/year while Delaware LLCs now pay $400/year (corps often $450+ including the report fee), so a 5-year state-cost gap of $1,600+ is typical. But venture funds, accelerators, and preferred-stock mechanics almost universally require a Delaware C-corp under the DGCL. If neither VC nor California nexus applies, Wyoming wins for bootstrapped LLCs; if California workers exist, either choice adds the $800 CA tax on top.
Yes. Under the $2.65M threshold (2026–2027 reports) you owe $0 and skip the tax report, but the Public Information Report is still due May 15.
Texas requires every taxable entity to file annually even at $0 tax: at or below the indexed no-tax-due threshold ($2.65M for 2026–2027 reports) no tax report is filed, the No Tax Due Report (05-163) was retired in 2024, but Form 05-102 (Public Information Report, listing officers/directors) or 05-167 (Ownership Information Report) is still required. Missing the May 15 deadline risks a $50 late penalty and charter forfeiture. Above the threshold, entities with up to $20M in revenue may use the EZ computation (0.331% of apportioned revenue); otherwise the long form applies at 0.75%, or 0.375% for retailers and wholesalers.
Due on the first day of your anniversary month each year; leave it unfiled for about 60 days and the state can administratively dissolve the entity.
Wyoming annual reports and license tax ($62 minimum online) are due on the first day of the month your entity was formed, every year. There is no separate late fee, but a report still unfiled about 60 days after the due date leads to notice and administrative dissolution (or revoked authority for a foreign entity). Reinstatement requires catching up reports, taxes, and fees. Keep a registered agent and calendar reminder — the state does not excuse missed deadlines.
No. It shields only net-income taxes on solicited tangible-goods sales, not the $800 minimum tax or the LLC gross-receipts fee.
Public Law 86-272 is a narrow federal shield for state net-income taxes when the only in-state activity is soliciting orders for tangible personal property. California's $800 minimum franchise tax (a privilege tax for doing business) and the LLC gross-receipts fee fall outside that shield, as do activities beyond mere solicitation (employees, offices, inventory, services). Do not rely on it for entity-level California compliance.
Have a Complex Multi-State Setup?
Check your physical and factor nexus triggers using our free interactive tool or compare Delaware, Wyoming, and California formation costs.