California Business Taxes: What LLCs Need to Know (2026)
California Business Taxes: What LLCs Need to Know (2026)
California business taxes come in layers. An LLC can owe a state entity tax even in a year with no profit, the owner pays personal income tax and self-employment tax on the profit, and sales tax, payroll taxes, local business taxes, and county property tax can apply on top of all of that. California has no general state business license. You register the entity with the Secretary of State, register with the CDTFA if you sell taxable goods, register with the EDD if you have employees, and then add the licenses and permits your activity requires. This guide covers the taxes in order of importance, using 2026 figures.
Disclaimer: This is informational content, not legal or tax advice. The right answer depends on your entity type, income, location, and activity. Confirm details with the agency named in each section, and consult a qualified CPA or tax attorney before you file or make an entity decision.
1. LLC Charges to the Franchise Tax Board
Every California LLC pays the Franchise Tax Board (FTB) whether or not it makes money. If your LLC was organized or registered in California in 2024 or later, it owes the $800 minimum annual franchise tax starting in its first year. The first-year exemption covered only LLCs formed from 2021 through 2023. These charges apply to the entity regardless of how it is taxed for federal purposes.
On top of the $800, the LLC fee applies once California-source total income reaches a threshold:
| California-source total income | Annual LLC fee |
|---|---|
| Under $250,000 | No LLC fee |
| $250,000 or more | $900 |
| $500,000 or more | $2,500 |
| $1,000,000 or more | $6,000 |
| $5,000,000 or more | $11,790 |
A late Form 568 carries a penalty of $18 per member per month, for up to 12 months. Set a calendar reminder for the filing date, and pay the $800 on time even if you have not yet finished the return.
Forming in Nevada or Delaware does not avoid the $800. If your LLC does business in California, or is organized or registered here, California still expects the tax.
2. Which California Return Your LLC Files
The LLC return is Form 568, the California Limited Liability Company Return. Form 565 is for general partnerships, so a multi-member LLC does not file it. Which return you file depends on how the LLC is taxed:
- Single-member LLC owned by an individual: The LLC still files Form 568 for the entity, and the owner reports the business income on the owner's Form 540. For a calendar-year filer, the Form 540 is due April 15.
- LLC taxed as a partnership: The LLC files Form 568, due the 15th day of the third month after year end (March 15 for a calendar year).
- LLC taxed as an S corporation: The LLC files Form 100S, due the 15th day of the third month after year end. S corporations pay 1.5% of net income, with an $800 minimum.
- LLC taxed as a C corporation: The LLC files Form 100 and pays the corporate income tax of 8.84% (10.84% for banks).
A newly incorporated or qualified corporation or S corporation owes no $800 minimum tax in its first taxable year. Confirm the exact treatment with the FTB or a CPA before you rely on it.
3. Personal Income Tax on Pass-Through Profit
Partnership and S corporation income passes through to the owner's personal California return. California personal income tax uses graduated rates, with the top rate at 12.3%. A 1% mental health tax applies to taxable income above $1,000,000, which brings the top marginal rate to 13.3% (Revenue and Taxation Code 17043). Brackets are indexed for inflation each year, so use the current FTB rate schedule rather than an older table.
Estimated payments are due on four dates: April 15, June 15, September 15, and January 15. The amount due on each date is not an equal quarter of the annual tax. Follow the Form 540-ES instructions to calculate each payment. Owners who expect a large tax bill should plan these payments in advance, because underpayment penalties can apply.
Some partnerships and S corporations can elect to pay California tax at the entity level under the pass-through entity elective tax. We cover that election separately, and it is worth reviewing with a CPA before the tax year begins.
4. California Self-Employment Tax for an LLC (Federal)
Self-employment tax is a federal tax, not a California tax. It is reported to the IRS, and it applies to the owner's share of net self-employment earnings. The rate is 15.3%: 12.4% for Social Security up to the annual wage base, and 2.9% for Medicare. The tax applies to 92.35% of net self-employment earnings. Owners with high income also owe an extra 0.9% Additional Medicare tax above the IRS income thresholds.
The Social Security wage base is $184,500 for 2026, up from $176,100 for 2025. Both examples below fall under the wage base:
| Net self-employment profit | Approximate self-employment tax |
|---|---|
| $80,000 | About $11,300 |
| $150,000 | About $21,200 |
These are estimates before deductions, the deduction for half of self-employment tax, and any other adjustments. The IRS Schedule SE calculates the actual amount. Entity choice affects this tax. An S corporation owner generally pays payroll tax on a reasonable salary, not on every dollar of profit, which is one reason owners compare entity types before they choose one.
5. Sales and Use Tax (CDTFA)
California sales tax has a 7.25% statewide base rate. District taxes add between 0.10% and 2.00%, so combined city rates run from 7.25% to 11.75%. The rate depends on where the sale is delivered or made, so check the CDTFA rate tables for each location you sell into. Register for a seller's permit at the CDTFA website, cdtfa.ca.gov. The seller's permit is free. When you buy items for resale, you give your supplier a resale certificate, and California does not require a specific form for it.
6. Payroll Taxes (EDD)
If your LLC has employees, register with the Employment Development Department (EDD) within 15 days of paying more than $100 in wages in a calendar quarter. Payroll obligations include unemployment insurance (UI), the employment training tax (ETT), state disability insurance (SDI), and personal income tax withholding from employee wages. Each has its own rate and wage base, and those figures change. Check the current rates on the EDD website at edd.ca.gov before you set up payroll. New hire reporting also applies, so build it into your onboarding checklist.
7. Local Business Taxes
There is no statewide business tax, but local governments often charge one. Of California's 483 cities, 445 report business tax revenue. There is no common formula, so the amount depends on the city where your business operates. Counties license only regulated activities. Check the city's website or call its finance department before you open.
Two large cities show how different the rules can be:
- Los Angeles: The city charges by business class per $1,000 of gross receipts. The retail rate is about $1.27 per $1,000, and the wholesale and child care rates are about $1.01 per $1,000. Professions are about $4.25 per $1,000. Check the current table before you file. A retailer with $500,000 in gross receipts would owe about $635 at the retail rate before any exemption. Businesses with worldwide receipts of $100,000 or less are exempt if they register and renew on time.
- San Francisco: The city charges a registration fee plus a gross receipts tax. The gross receipts tax does not apply to businesses with up to $5,000,000 in San Francisco receipts, a threshold that took effect January 1, 2025. Gross receipts tax rates start at 0.100% in the Treasurer's table, so confirm your rate in the current table.
Find your city's business tax requirements on your city's website, or ask the California Small Business Development Center network where to start.
8. Property Tax on Business Equipment
California taxes business personal property, such as equipment, furniture, fixtures, and tools, even though it does not tax most business inventory in the same way. Each county assessor requires a business property statement, Form 571-L in most counties. The filing is generally due April 1, but confirm the deadline and any penalty with your county assessor, because counties administer the rules.
Next Steps
- Register your entity with the Secretary of State through bizfile Online at bizfileonline.sos.ca.gov.
- Calendar the $800 franchise tax, the Form 568 due date, and any LLC fee that applies to your expected California-source income.
- Decide how the LLC will be taxed, and confirm the return and estimated payment schedule with a CPA.
- Register with the CDTFA if you sell taxable goods, and with the EDD if you will have employees.
- Check your city and county for business tax, licensing, and business property filing requirements.
For official rules and forms, start with the FTB at ftb.ca.gov, the CDTFA at cdtfa.ca.gov, and the Secretary of State's Business Programs Division at sos.ca.gov/business-programs. If your LLC has multiple owners, multiple states, or income near one of the LLC fee thresholds, a CPA or tax attorney can save you more than their fee costs.