California LLC Taxes

LLC Pass-Through Taxation

By default, LLCs don't pay taxes directly. Instead, the LLC members report the income (or losses) on their personal Form 1040 tax return. This is called pass-through taxation — tax responsibility "passes through" the LLC to its owners.

How Are LLCs Taxed in California?

By default, a California LLC is taxed by the IRS based on the number of members:

• An LLC with 1 owner (Single-Member LLC) is taxed like a Sole Proprietorship
• An LLC with 2+ owners (Multi-Member LLC) is taxed like a Partnership

These are the "default" statuses — automatically applied based on member count. You can also elect to have your LLC taxed as a Corporation (S-Corp or C-Corp) by filing extra paperwork with the IRS.

Single-Member LLC (default)

The IRS treats Single-Member LLCs as Disregarded Entities — the LLC doesn't file its own federal return. Instead, the owner reports LLC income on their personal Form 1040 (Schedule C if owned by an individual).

Multi-Member LLC (default)

Multi-Member LLCs file a Form 1065 Partnership Return and issue a Schedule K-1 to each member. Each member then reports their share of profits on their personal Form 1040.

Husband & Wife LLC

Electing Corporate Taxation

• S-Corporation: File Form 2553 with the IRS. Can reduce self-employment taxes once the LLC has consistent profits (generally $70,000+ net income per member). Speak with an accountant first.
• C-Corporation: File Form 8832 with the IRS. Uncommon for small LLCs. Primarily useful for large employers offering healthcare fringe benefits.

California State Income Tax

California has a state income tax at rates of 1%–13.3% (graduated — highest top rate in the US). LLC members report their share of LLC profits on their California state tax return.

All California LLCs file Form 568 (LLC Return of Income) with the California Franchise Tax Board (FTB) each year — even Single-Member LLCs. Form 568 is typically due March 15 or April 15. The FTB grants an automatic extension to file, but NOT to pay.

Contact the California Franchise Tax Board (FTB) at 800-852-5711 for more information.

California Special LLC Taxes

California $800 Annual Franchise Tax

All California LLCs must pay an $800 Annual Franchise Tax every year to the California Franchise Tax Board — regardless of revenue or activity.

• First payment due: 4.5 months after your LLC is approved
• Ongoing due date: April 15 each year
• Filed using: FTB Form 3522 (payment voucher)

California LLC Estimated Fee (Form 3536)

If your LLC's gross annual receipts exceed $250,000, you must also file and pay an Estimated Fee using Form 3536. The fee ranges from $900 to $11,790 depending on gross receipts.

Local Income Tax

You and/or your LLC may also need to file and pay income taxes with your local municipality (city, county, etc.). Contact your local government or hire an accountant to confirm local requirements.

California Sales Tax

If your LLC sells taxable products (and sometimes services) in California, you may need to collect sales tax and register for a Seller's Permit (also called a resale license or sales tax permit).

California's statewide base sales tax rate is 7.25%. Local district taxes can bring the total to 10.75% or more. A Seller's Permit is free from the California Department of Tax and Fee Administration (CDTFA).

Register for California Seller's Permit →

Contact the California CDTFA at 800-400-7115 with questions.

California LLC Payroll Taxes

If your California LLC has employees, you must handle payroll taxes, which include:

• Federal income tax withholding
• California state income tax withholding
• Social Security and Medicare taxes (FICA)
• Federal unemployment tax (FUTA)
• California state unemployment tax (SUTA)

Payroll calculations are complex — most LLC owners hire a payroll service or accountant.

California Tax Agency Contact

California LLC Taxes — FAQs