What is the $800 California LLC franchise tax and does my bookkeeper need to track it?
The $800 franchise tax is an annual fee every California LLC pays to the Franchise Tax Board simply for existing as an LLC in the state. It doesn’t matter if your business made money, broke even, or sat completely dormant all year. If the LLC is active, the $800 is owed.
The due date is the 15th day of the 4th month of your tax year. For most LLCs operating on a calendar year, that means April 15. This is separate from your income tax return. It’s a flat fee paid directly to the Franchise Tax Board using Form 3522, the LLC Tax Voucher. Many business owners confuse this with their income tax filing or assume it’s bundled in somehow, but it’s not. It has to be paid on its own.
If you miss the deadline, the penalty is 5% of the unpaid tax for each month or partial month it remains late, plus interest. On $800 that adds up to $40 per month, which compounds quickly if you forget about it entirely. The Franchise Tax Board doesn’t send reminders before the due date. They send notices after you’ve already missed it and owe penalties.
There is one exemption worth knowing about. LLCs formed on or after January 1, 2024 are exempt from the franchise tax for their first taxable year. Starting in year two, the full $800 applies like every other California LLC. If you formed your LLC before that date, this exemption doesn’t apply to you.
Should your bookkeeper track this? Without question. This is one of the most basic compliance obligations for any California LLC, and it’s exactly the kind of thing that falls through the cracks when nobody is watching the calendar. Your bookkeepers in Buena Park or wherever you’re located should have the due date flagged, the payment recorded properly in your books, and a reminder system in place so it never gets missed.
The payment itself gets recorded as a tax expense on your books. It’s not deductible on your federal return as income tax, but it does need to be categorized correctly so your financial statements reflect the true cost of operating your LLC. A bookkeeper handling your full-service bookkeeping would track this alongside your other recurring obligations like estimated tax payments, sales tax filings, and payroll deadlines.
If you have multiple LLCs, each one owes its own $800. Business owners with holding companies, real estate entities, or separate LLCs for different ventures can end up owing several thousand dollars in franchise tax alone. Keeping track of multiple due dates and payments is where things get messy fast without someone managing it.
The bottom line is that the franchise tax isn’t optional and the state isn’t forgiving about late payments. Having a bookkeeper who tracks the deadline and records the payment correctly saves you from penalties and keeps your books accurate.
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