California Franchise Tax Board Fee: What You Need to Know

Most businesses in California must pay a franchise tax. Get all the details about this state-specific tax right here, including key deadlines and forms.

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Kathleen Crampton
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Kathleen Crampton

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Updated on: August 6, 2025
Read time: 6 min

As California's primary tax collection agency, the Franchise Tax Board (FTB) plays a crucial role in every business owner's journey in the state, from startup formation to ongoing compliance. In addition to collecting personal and corporate income tax, the agency has also imposed what’s called franchise tax, which is a fee required for the privilege of doing business in the state.

Does your company have to comply with the California franchise tax fee? Learn which entities must comply, how to pay the fee, and key deadlines involved so that you can avoid costly penalties that could derail your entrepreneurial dreams.

Key takeaways

  • All California business entities except sole proprietorships and general partnerships must pay the $800 minimum franchise tax.
  • First payments are due within three to four months after formation, and annual payments are due by April 15.
  • Form your company after Dec. 15 to avoid double billing and save money in your first year.
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What is the California Franchise Tax Board fee, and who must pay it?

The California franchise tax is a minimum fee of $800 and applies to most formal business entities. It is different from personal income tax and sales tax. The requirement applies broadly to ensure that all entities benefiting from California's business environment contribute to state revenue. 

The following entity types are responsible for paying franchise tax to the state annually, regardless of whether they generate profits or conduct active business:

  • S corporations
  • C corporations 
  • Limited liability companies (LLCs) 
  • Limited liability partnerships (LLPs)
  • Limited partnerships (LPs)
  • Foreign entities registered or doing business in California

According to California Revenue and Taxation Code Section 23101, a company is considered "doing business" in California if it engages in transactions within the state for financial gain, maintains property or employees in California, or meets specific sales thresholds. 

Important exemptions: Sole proprietorships and general partnerships do not pay the franchise tax fee, as they are not considered separate legal entities under California law.

The $800 fee represents the minimum tax obligation. Profitable entities may owe additional amounts based on their income levels, with LLCs potentially facing additional fees ranging from $900 to $11,790, depending on total income.

Minimum franchise tax vs. LLC and corporation annual fees

Even though the minimum $800 fee applies, the tax requirements for corporations and LLCs are a little different. 

The amount of franchise tax that S corporations and C corporations pay is based on a percentage of their net income for the taxable year: 1.5% for S corporations and 8.84% for C corporations. The minimum they will pay for franchise tax is $800. 

LLCs and other entities, on the other hand, pay a flat fee of $800. But LLCs have what’s called an annual fee on top of that franchise tax fee. The annual fee is based on the total income for the taxable year: 

  • Income of $250,000–$499,000 = an annual fee of $900
  • Income of $500,000–$999,000 = an annual fee of $2,500
  • Income of $1,000,000–$4,999,999 = an annual fee of $6,000
  • Income of $5,000,000 or more = an annual fee of $11,790

Limited partnerships and limited liability partnerships do not have the additional annual fee on top of the franchise tax.

When are franchise tax fees due in California?

Understanding California's tax deadlines is crucial for avoiding penalties and managing your cash flow effectively. Here is a breakdown of when franchise tax payments are due for which business entities.

First year tax due Subsequent years tax due
S corp 15th day of the 3rd month after the close of your tax year April 15
C corp 15th day of the 4th month after the close of your tax year April 15
LLC 15th day of the 4th month after the beginning of your tax year April 15
Limited partnership and limited liability partnership 15th day of the 3rd month after the close of your tax year April 15
First year tax due Subsequent years tax due
S corp 15th day of the 3rd month after the close of your tax year April 15
C corp 15th day of the 4th month after the close of your tax year April 15
LLC 15th day of the 4th month after the beginning of your tax year April 15
Limited partnership and limited liability partnership 15th day of the 3rd month after the close of your tax year April 15

How to avoid double billing

The FTB follows a specific schedule that can create challenges for companies formed late in the year.

The double billing challenge: Businesses formed near year-end face a particularly expensive situation. Consider an LLC formed on Nov. 15. The first year's $800 fee becomes due March 15 of the following year (four months after formation), but the second year's fee is due just one month later on April 15. This creates a $1,600 tax burden within weeks of each other. It's a similar situation for businesses formed in January, as their fee would be due soon after April 15. 

Strategic timing to avoid double billing: The tax agency provides relief for businesses formed in the final 15 days of the year. Entities formed between Dec. 16 and Dec. 31 are not charged the first-year fee, meaning they only pay one franchise tax fee in April rather than two payments.

This timing strategy can save new companies money in their first year of operation. If your business formation isn't time-sensitive, waiting until after December 15 to file your organizational documents represents a significant cost-saving opportunity.

Filing extensions

The California state tax agency grants automatic extensions for filing returns, but you must request the extension and pay the estimated tax by the original due date. Use Form 3539 for corporations or Form 3537 for LLCs to request additional time to file. Extensions typically provide an additional six or seven months to complete your return, though interest and penalties may apply if you owe additional taxes beyond the minimum fee.

How to pay the FTB fee

The FTB offers multiple convenient payment options to accommodate different preferences and situations. Online payments through the agency’s Web Pay site provide the fastest and most secure method, allowing you to pay directly from your bank account or by credit card.

You can also mail checks or money orders to the following address:

Franchise Tax Board

P.O. Box 942857

Sacramento, CA 94257-0501

When paying by mail, include the appropriate payment voucher, notice, or bill, and make the check or money order payable to Franchise Tax Board. You’ll also need to write your business name, FTB ID or Business Entity ID, and tax year on the payment. 

Certain companies may be required to pay by electronic funds transfer. Get more information about this process. 

Essential FTB forms and publications

The FTB maintains an extensive library of forms and publications designed to help taxpayers understand their obligations and complete required filings accurately. 

The tax agency's official website provides the most current versions of all forms through its searchable forms database. You can search by taxpayer type, form number, keyword, or topic to find exactly what you need. All documents are available as downloadable PDFs, but many can be completed and submitted electronically through the Web Pay portal.

Here are the most commonly used forms. 

  • Form 100: Corporation Franchise or Income Tax Return
  • Form 568: Limited Liability Company Return of Income
  • Form 3539: Payment for Automatic Extension for Corporations and Exempt Organizations
  • Form 3537: Payment for Automatic Extension for LLCs
  • Form 3705: Request for Taxpayers' Rights Advocate assistance

Some of these documents may be available as a free California tax booklet at your local library or post office during filing season.

Franchise Tax Board FAQs

Do I have to pay the franchise tax if my company is not active?

Yes, California requires the $800 minimum franchise tax from all formally recognized business entities, regardless of activity level or profitability. The only way to stop owing the fee is to dissolve or cancel your business entity with the California Secretary of State and file a final tax return with the Franchise Tax Board (FTB).

Can I avoid the franchise tax by forming out of state?

You can’t avoid franchise tax by forming out of state. All entities "doing business" in California are required to pay the franchise tax, regardless of where they were officially registered. You may end up owing taxes in multiple states if you register elsewhere but operate in California.

What happens if I pay the franchise tax late?

Late payments may incur financial penalties and interest charges that compound over time. Learn more about common penalties and fees for late tax payments in California.

Do nonprofits pay the California franchise tax fee?

Nonprofits and charities aren’t automatically exempt from paying the California franchise tax fee. All business entities are affected. Nonprofits and charities can choose to apply for an exemption from the California Franchise Tax Board (FTB).

How LegalZoom can help with California franchise tax compliance

Navigating California's tax requirements doesn't have to be overwhelming if you have the right support. LegalZoom's proven business formation services help you start on the right note so you can stay compliant from the very beginning.

Pair our business formation services with comprehensive compliance guidance and monitoring from our Compliance Concierge to ensure you always stay current with annual filings and fee payments. You can also set up a tax consultation with our partner 1-800Accountant to ensure you’re doing everything you need to comply with your tax obligations.

Start your business in California today with LegalZoom.

Jane Haskins, Esq., contributed to this article.

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This article is for informational purposes. This content is not legal advice, it is the expression of the author and has not been evaluated by LegalZoom for accuracy or changes in the law.