How to Avoid California’s $800 Franchise Tax in Your First Year (2025)
Published: 21:08:2025
California LLC Franchise Tax: The $800 Rule
- Every California LLC must pay an $800 franchise tax each year to the Franchise Tax Board (FTB).
- Normally, this fee is due within the first year after forming your LLC.
First-Year $800 Franchise Tax Waiver (AB 85 Explained)
California law waives the $800 tax for your LLC’s first tax year if:
- Your LLC was formed on or after January 1, 2021.
- The LLC is your first formation year — not a conversion or re-registration.
- You are not doing business in California prior to formation.
Meaning:
If you form a new LLC in California, you don’t pay the $800 until your 2nd tax year.
Situations Where the Waiver Doesn’t Apply
- Registering late in the year and assuming you’ll avoid paying the next year (you still will).
- Converting an existing entity into an LLC — the waiver doesn’t apply.
- Foreign LLC registration — out-of-state LLCs registering in CA don’t get the waiver.
California LLC Franchise Tax Payment Deadlines
Scenario | 1st-Year $800 Fee | 2nd-Year Due Date |
New CA LLC formed in 2025 | Waived | 15th day of 4th month in year 2 |
Existing LLC moving to CA | Due | 15th day of 4th month in year 1 |
How to Maximize the First-Year Tax Waiver
- Start early in the year so you maximize the free period.
- Avoid triggering “doing business” status before you’re ready.
- Plan your launch to align with tax savings.
Best LLC Filing Services for California Businesses
Service | CA LLC Filing | Tax Guidance | Starting Price |
ZenBusiness | ✅ | Basic tips | $49 + state fees |
Northwest RA | ✅ | Detailed help | $39 + state fees |
Incfile | ✅ | Basic tips | $0 + state fees |
Final Takeaway: Avoiding California’s $800 Franchise Tax in 2025
Forming a California LLC in 2025 gives you a one-time break from the $800 franchise tax — but only if you meet the waiver rules. Miss the criteria, and you’ll pay in year one.
FAQs – California’s $800 Franchise Tax in Your First Year
1. Do all California LLCs have to pay the $800 franchise tax?
Yes, but new LLCs formed after January 1, 2021, are exempt in their first tax year.
2. When is the $800 tax due for a new California LLC?
The first $800 payment is due in the second year, on the 15th day of the 4th month.
3. Does the waiver apply to foreign LLCs registering in California?
No. Out-of-state LLCs registering in California must pay the $800 in their first year.
4. How can I maximize the first-year waiver?
Form your LLC early in the year, avoid doing business before official formation, and plan ahead to stretch the free period.