Do You Have to Pay the $800 LLC Fee in California the First Year? What to Know in 2025

You set up your new LLC in California, ready to roll out your business idea, and suddenly—smack—someone tells you about the infamous $800 fee. You start to wonder, do you really have to pay this massive fee right from day one, or do you get a bit of breathing room? If you’re already counting every dollar, this chunky fee feels like a gut punch. But rules with taxes in California are always shifting, so what’s the real deal in 2025?

Understanding the $800 LLC Fee: What It Is and Why It Exists

If you’re wondering why there’s this random $800 bill for a new company, you’re not alone. California calls this the “LLC annual franchise tax.” Think of it as your ticket to play in the Golden State. The state believes businesses need to “pay their share” just for the privilege of being here, whether or not you make a dime. Not every state does this, but California likes to go big. The only exceptions are some non-profits and a few rare types of business entities.

For decades, every LLC—no matter how small, even if you just have an idea scribbled on a bar napkin—had to cough up $800 every year it existed, from the very first year. Did you just register your LLC in June? Congrats! The state wanted its $800 that same year. That’s a lot of burritos, late-night caffeine, or, in my case, premium dog treats for Max the golden retriever.

What do you get for that fee? Not much, honestly—it’s not based on your profits. You could earn a million bucks or zilch, and the state doesn’t care. This fee is often just the cost of being official, showing up on the Secretary of State’s registry. Like dropping your name at a club’s front desk and getting charged just for the privilege of standing inside.

Here's something wild: Only California, Delaware, and a couple other states charge a flat annual fee, but $800 is among the highest in the country. That’s a big reason you hear so many business owners griping about it at meetups or online forums.California LLC fee is searched by thousands every month just to check if it really applies to them.

Some business owners used to get around this by not filing their LLC paperwork until later in the year (hello, procrastinators), so they could delay the fee as long as possible. Of course, that also meant they were uninsured, unprotected, and one mistake away from getting sued personally. Not the safest move, but it shows how much entrepreneurs resent the charge.

This fee isn’t your only cost either—if your LLC’s income is over $250,000, you get hit with additional taxes based on gross receipts. But that’s a whole different headache for another day. For now, the $800 is the main event for most new LLCs without fat revenue streams yet.

Traditionally, you had to send in the $800 with Form 3522 (LLC Tax Voucher) to the Franchise Tax Board (FTB) each year, usually by the 15th day of the fourth month after forming your LLC. People mess this up all the time and rack up fines. So, keeping that date in your calendar, right next to your dog’s flea medication reminder, is smart.

Law Changes: The First-Year Exemption Twist (And Why It Matters in 2025)

This is where things start to look brighter (or at least less grim). Up until a couple years ago, California made no bones about it—you paid in year one, period. That changed in 2020, when the state rolled out a temporary break. Trying to boost entrepreneurship during and after the pandemic, they tweaked the rules so that for LLCs formed from January 1, 2021, through December 31, 2023, there was no $800 due in the first tax year.

So, what happened in 2024 and 2025? The benefit didn’t actually disappear. At first, the law wrote the sunset for one year only, but in late 2023, lawmakers quietly extended it. If an LLC organizes in 2024 or 2025, it can still dodge that first $800 (that is, you pay nothing in your first “tax year,” but you do need to pay it for your second year and onward). So if you’re reading this while still considering when to file, this is your sweet spot.

This isn’t just for LLCs by the way. The law also covers Limited Partnerships (LPs) and Limited Liability Partnerships (LLPs). S corporations, C corporations, and sole proprietors don’t get the break. Those first two years for a new business are usually pretty lean, so people have saved millions across the state thanks to this change. Think about it—if 160,000 new LLCs form each year, that’s $128 million not being collected, but the state figures they’ll make it up when you thrive and start paying more taxes later.

One major tip: The exemption means you don’t OWE the fee, but you still have to file your returns on time. If you blow off the paperwork, you can still get hit with penalties or your LLC can get suspended. I’ve seen friends scramble because they thought skipping the fee meant skipping the filing, but the government still wants to see your forms. The Franchise Tax Board isn’t big on forgiveness if you miss something basic.

Here’s a little-known snag: If you formed your LLC in late December but didn’t start business activities until January, the “first year” can still get fuzzy. Your LLC’s “first taxable year” gets counted by when you file with the Secretary of State. Don’t try to get cute and delay operations to trick the system—the FTB sees through that. As my dog Max loves to remind me, you can’t outsmart someone who’s already got your snacks… or your tax money.

Another wrinkle: If your LLC elects to be taxed as an S or C corporation, this exemption doesn’t apply, because corporations have a separate minimum franchise tax, and the fee structure changes. LLCs usually default to pass-through taxation, which means all profits pass to the owners (called members), but if you file that election, you lose the first-year exemption.

Let’s be clear—if you started your LLC in 2020 or before, you do owe the fee, no exceptions. If you’re just kicking off in 2025, you’re lucky: the exemption’s still in effect, unless Sacramento shakes things up again.

One more tip: You should still budget for the next year. When that $800 bill kicks in, it’s on you, no matter how little profit you make or how slow your business grows. It’s like paying for the first year of Netflix on a free trial, then getting hit with the charge when you finally forget to cancel by the renewal date.

Best Practices, Big Traps, and Keeping Your LLC in Good Standing

The $800 fee might seem like the big boss battle, but honestly, most trip-ups come down to simple paperwork mistakes. I once put an old address on one of my FTB forms and didn’t get a notice until months later—nearly cost me dearly (and Max nearly lost out on his favorite squeaky toy fund).

There’s also the risk of “penalty stacking.” Miss the due date, and you get slapped with a late fee. Ignore a few years? You’ll rack up $800 after $800, plus penalties and interest. Eventually, the state can suspend your LLC, shutting down your business bank account and contracts. If you’re trying to land a big client, nothing kills a deal like learning your business doesn’t legally exist. Don’t let the cost or annoyance tempt you to skip filings.

To keep your LLC healthy, set these reminders on your phone or calendar:

• Mark the 15th day of the 4th month after your LLC forms—this is usually when fees are due (in year two, and every year after).
• Even if your first year is fee-free, file your annual statements and FTB paperwork every year.
• Don’t ignore a strange notice from the Franchise Tax Board. Lost mail or ignored emails ruin more startups than you’d think.

Another tip: Name your LLC bank account exactly as your legal paperwork shows. Many local banks freeze accounts over mismatches with state records. Same goes for your business insurance—small errors spell big problems down the road.

If you’re earning over $250,000, remember that extra California “LLC fee” (which is not the $800 tax, but a gross receipts fee). Here’s a breakdown for 2025:

These are not instead of the $800, but on top of it. Even with a fee-free first year, big earners in California don’t skate by forever. If you’re lucky enough to cross those thresholds, loop in a CPA or business tax expert fast.

Now, for those thinking, “Why not just launch in another state?” It’s tempting. But if you’re physically working or living in California, or hiring employees here, you’ll still owe the $800—and possibly get penalized for organizing out-of-state. A Nevada LLC looks cool on paper, but once California sniffs you out, they’ll treat you like any local business, fee and all (plus late penalties if you skipped the paperwork).

After helping a few friends launch their own businesses, here’s my advice: File honestly, keep your records clean, and work the timing of your launch if you can. The first-year exemption won’t last forever—lawmakers constantly toy with extending or killing it. If the exemption helps you take the leap into business, good. But don’t build your whole budget on not paying taxes. Assume California will always want its pound of flesh.

If you’re already running an LLC from before 2021, sorry—no retroactive benefit, so you’re on the hook for every year you were active. For everyone else starting up in 2025, enjoy the head start, but get your systems tight. The Franchise Tax Board is a stickler for paperwork, and you don’t want your LLC’s future relying on their mercy—or on guessing the rules at the last minute when that $800 comes due.