By Jake Lawson, LLC Formation Strategist
California entrepreneurs, let’s talk straight about the ongoing costs of maintaining your Golden State LLC. After helping 800+ California business owners navigate these requirements—and dealing with California’s complex fee structure myself—I’m breaking down exactly what you’ll pay, when you’ll pay it, and how to avoid costly mistakes.
Bottom line first: California is expensive for LLCs. You’re looking at minimum $820 annually, but it can reach $12,590+ for successful businesses. Here’s everything you need to know to stay compliant and protect your business.
California LLC Annual Fee Breakdown: The Real Numbers
1. Annual Franchise Tax: $800 (Unavoidable)
Due: April 15th every year
First payment: 15th day of 4th month after formation
Form: 3522 (LLC Tax Voucher)
This is California’s “privilege tax” for doing business in the state. Every California LLC pays this regardless of income or activity—even if you made $0.
Jake’s reality check: This $800 hits whether you’re profitable or struggling. Budget for it from day one.
2. Statement of Information: $20 (Every Two Years)
Due: Every two years by your formation anniversary
First filing: Within 90 days of formation
Filed: Online only through California Secretary of State
Updates your LLC’s contact information and management details with the state.
Pro tip: Set calendar reminders. Missing this filing can suspend your LLC’s good standing.
3. LLC Estimated Fee: $900-$11,790 (High Earners Only)
Due: June 15th annually
First payment: 15th day of 6th month after formation
Form: 3536
Triggers: California gross receipts of $250,000+
Here’s the brutal fee schedule based on California gross receipts:
| California Gross Receipts | Annual Fee |
| $0 – $249,999 | $0 |
| $250,000 – $499,999 | $900 |
| $500,000 – $999,999 | $2,500 |
| $1,000,000 – $4,999,999 | $6,000 |
| $5,000,000+ | $11,790 |
Jake’s analysis: This is California’s way of taxing success. Plan for it as your business grows.
4. LLC Return of Income: Variable Cost
Due: March 15th (partnership tax election) or April 15th (sole proprietorship election)
Form: 568
Required: All California LLCs regardless of income
This comprehensive tax return reports your LLC’s financial activity and ensures compliance with items 1-3 above.
Professional tip: Hire a California CPA. The complexity isn’t worth the DIY headache.
Total Annual Costs: What to Budget
Minimum Annual Costs (Under $250K Revenue)
- Annual Franchise Tax: $800
- Statement of Information: $10 (averaged over two years)
- CPA fees: $500-1,500
- Total: $1,310-2,310 annually
High-Revenue Business Costs ($5M+ Revenue)
- Annual Franchise Tax: $800
- LLC Estimated Fee: $11,790
- Statement of Information: $10 (averaged)
- CPA fees: $2,000-5,000
- Total: $14,600-17,600 annually
California’s Infamous “Double Tax” Trap
The scenario: Form your California LLC in October-December, and you’ll owe:
- First $800 payment: February 15th (for partial year)
- Second $800 payment: April 15th (for next full year)
- Total: $1,600 within 6 months
The solution: Use a “future effective date” of January 1st to avoid this double payment.
Jake’s recommendation: If forming late in the year, delay the effective date to January 1st unless you have an urgent business need.
Critical Filing Deadlines (Miss These at Your Peril)
New LLC First-Year Timeline
Month 1-3 after formation: File Statement of Information (within 90 days)
Month 4 (15th day): First franchise tax payment due
Month 6 (15th day): First estimated fee due (if applicable)
Following March/April: First Form 568 due
Ongoing Annual Schedule
March 15th: Form 568 due (partnership election)
April 15th: Franchise tax payment + Form 568 due (sole prop election)
June 15th: Estimated fee due (if applicable)
Formation anniversary: Statement of Information due (every 2 years)
Common California LLC Fee Mistakes (Expensive Ones)
Mistake #1: Thinking the $800 franchise tax is optional because you had no income
Reality: It’s mandatory regardless of business activity
Cost: $800 + penalties and interest
Mistake #2: Missing the Statement of Information deadline
Reality: Your LLC loses good standing and can be suspended
Cost: Business disruption + reinstatement fees
Mistake #3: Not planning for estimated fees as revenue grows
Reality: Sudden $900-11,790 annual bill when you hit $250K+ revenue
Cost: Cash flow disruption + potential penalties
Mistake #4: DIY complex tax filings
Reality: California’s requirements are intricate and penalty-heavy
Cost: Penalties, interest, and time fixing mistakes
Mistake #5: Late formation timing creating double tax liability
Reality: October-December formations trigger two $800 payments quickly
Cost: Extra $800 in first year
Tax Election Impact on Due Dates
Default (Sole Proprietorship Election)
- Form 568 due: April 15th
- Aligns with personal tax deadline
Partnership Election
- Form 568 due: March 15th
- Earlier deadline, often missed
S-Corp or C-Corp Election
- Different forms required (100S or 100)
- March 15th deadline
- Additional complexity
Jake’s advice: Understand your tax election and its implications before formation, not after.
When California LLCs Make Financial Sense
Good Candidates
- Revenue potential above $100K annually
- Need liability protection for high-risk business
- Operating exclusively in California
- Access to California’s large market justifies costs
Consider Alternatives
- Low-revenue businesses (under $50K annually)
- Can operate from other states effectively
- Simple consulting or service businesses
- Want to test business viability first
Strategies to Minimize California LLC Costs
Timing Optimization
- Form with January 1st effective date to avoid double taxation
- Plan estimated fee payments for cash flow management
Professional Help
- Hire California CPA familiar with LLC requirements
- Budget $500-2,000 annually for professional assistance
Compliance Management
- Set up calendar reminders for all deadlines
- Use business management software to track requirements
- Consider professional compliance services for complex businesses
California vs. Other States: The Real Comparison
California Annual Costs
- Minimum: ~$1,300
- High-revenue: $14,000+
Business-Friendly Alternatives
- Wyoming: ~$60 annually
- Delaware: ~$300 annually
- Nevada: ~$325 annually
- Texas: ~$0 annually (no annual reports)
Jake’s analysis: California’s costs are justified only if you need California market access or residency requires it.
Red Flags: When to Avoid California LLCs
- You can operate effectively from another state
- Revenue projections are under $50K annually
- You’re testing a business concept
- Cash flow is extremely tight
- You’re a solopreneur with low liability risk
Professional Services You’ll Need
California CPA (Essential)
- Annual cost: $500-5,000
- Handles complex tax filings
- Ensures compliance with changing regulations
- Worth every penny for peace of mind
Registered Agent (Required)
- Annual cost: $125-300
- Must have California address
- Handles legal document service
- Maintains privacy if desired
Business Attorney (Situational)
- Hourly rates: $300-600
- Needed for complex structures or issues
- Operating agreement drafting
- Compliance problem resolution
California LLC Compliance Calendar
January
- Plan for April franchise tax payment
- Review previous year’s estimated fee liability
February/March
- Prepare Form 568
- Gather financial records for CPA
April
- Pay $800 franchise tax
- File Form 568 (if sole proprietorship election)
- File Form 568 by March 15th (if partnership election)
June
- Pay estimated fee (if applicable)
- Review revenue projections for next year
December
- Plan formation timing for new year (avoid double taxation)
- Review compliance for upcoming year
Bottom Line: California LLC Annual Costs
California LLCs are expensive but can be worth it for the right businesses. Budget minimum $1,300 annually, potentially much more for successful businesses.
My recommendation: Only form a California LLC if:
- You need California market presence
- Your revenue potential justifies the costs
- You have liability protection needs
- You can’t operate effectively from another state
For most entrepreneurs: Consider forming in business-friendly states like Wyoming or Delaware unless California presence is essential.
If you’re committed to California: Budget properly, hire professionals, and stay on top of deadlines. The costs and complexity are manageable with proper planning.
Planning your California LLC strategy? The decision isn’t just about formation—it’s about understanding long-term costs and compliance requirements. Make sure California’s benefits justify its substantial ongoing expenses.
Need personalized guidance on California LLC costs and alternatives? Contact Jake Lawson at llciyo.com for expert advice tailored to your specific business situation and goals.