Franchise Tax

Franchise Tax in California: Complete Guide 2026

Updated 2026-03-10

Data Notice: Figures, rates, and statistics cited in this article are based on the most recent available data at time of writing and may reflect projections or prior-year figures. Always verify current numbers with official sources before making financial, medical, or educational decisions.

Franchise Tax in California: Complete Guide 2026

Tax information is for educational purposes only and does not constitute tax advice. Consult a licensed tax professional for your specific situation.

California imposes a franchise tax on most businesses organized or doing business in the state. Unlike Delaware’s share-based system or Texas’s margin-based approach, California’s franchise tax is essentially a corporate income tax with a minimum tax floor. C-corporations pay ~8.84% of net income (or a minimum of ~$800), while S-corporations pay ~1.50% of net income (or a minimum of ~$800). LLCs are subject to an ~$800 annual tax plus an additional fee based on total income. The Franchise Tax Board (FTB) administers the tax for all entity types.

California Franchise Tax Rates (2026)

Corporations

Entity TypeTax RateMinimum Tax
C-Corporation~8.84% of net income~$800
S-Corporation~1.50% of net income~$800
Bank and financial corporation~10.84% of net income~$800

LLCs

Total IncomeAnnual Fee
$0 — ~$249,999$0 (plus ~$800 annual tax)
~$250,000 — ~$499,999~$900 (plus ~$800 annual tax)
~$500,000 — ~$999,999~$2,500 (plus ~$800 annual tax)
~$1,000,000 — ~$4,999,999~$6,000 (plus ~$800 annual tax)
~$5,000,000 or more~$11,790 (plus ~$800 annual tax)

Limited Partnerships and LLPs

Entity TypeAnnual Tax
Limited partnership (LP)~$800
Limited liability partnership (LLP)~$800

How California Franchise Tax Works

Corporate Franchise Tax

The California franchise tax for corporations is calculated as the greater of:

  1. The tax rate multiplied by net income (apportioned to California for multistate businesses), or
  2. The ~$800 minimum tax

This means every corporation registered in California owes at least ~$800 per year, even if it has no income or operates at a loss. The ~8.84% rate for C-corporations is among the highest corporate tax rates in the nation.

S-Corporation Tax

S-corporations in California pay the ~1.50% rate on net income, with the same ~$800 minimum. Unlike the federal treatment where S-corp income passes through to shareholders, California imposes this entity-level tax in addition to the shareholders’ individual income tax on their pass-through income.

LLC Annual Tax and Fee

California LLCs face a dual obligation:

  1. Annual tax of ~$800: Due regardless of income, payable by the 15th day of the 4th month after the beginning of the LLC’s tax year.
  2. Annual fee: Based on total California income, ranging from $0 to ~$11,790. Due by the 15th day of the 6th month of the LLC’s tax year.

The ~$800 annual tax applies even to newly formed LLCs, though California recently exempted first-year LLCs from this tax for entities formed on or after January 1, 2021 (subject to ongoing legislation).

Apportionment for Multistate Businesses

Businesses operating in multiple states apportion their income to California using a single sales factor formula. Only the California-sourced portion of income is subject to the franchise tax, though the ~$800 minimum applies regardless.

Filing Requirements

Entity TypeReturn FormDue Date
C-CorporationForm 100April 15 (calendar year)
S-CorporationForm 100SMarch 15 (calendar year)
LLC (classified as partnership)Form 568March 15 (calendar year)
LLC (classified as corporation)Form 100 or 100SSame as applicable corporation
LP/LLPForm 565March 15 (calendar year)

Extensions are available but do not extend the time to pay estimated taxes or the minimum franchise tax.

Comparison to Other States

StateCorporate Tax RateMinimum TaxLLC Annual Tax
California~8.84% (C-corp)~$800~$800 + fee
Texas~0.75% (margin)$0 (below threshold)Same as corporations
DelawareN/A (franchise only)~$175 (corp) / ~$300 (LLC)~$300
NevadaNo corporate income tax$0~$200 (business license)
New York~7.25% (business)VariesFiling fee only

California’s ~8.84% rate is among the highest corporate tax rates nationally, and the ~$800 minimum tax applies even to inactive entities.

Tips for Minimizing California Franchise Tax

  1. Evaluate your entity choice. S-corporations pay ~1.50% versus ~8.84% for C-corporations. If pass-through taxation is appropriate, the S-corp election saves significantly at the entity level.

  2. Monitor LLC income thresholds. The LLC fee increases sharply at certain revenue levels. If your income is near a threshold, review whether timing adjustments can reduce the fee.

  3. Use single sales factor apportionment. Multistate businesses can reduce California-apportioned income by increasing out-of-state sales relative to California sales.

  4. Dissolve or withdraw inactive entities. The ~$800 minimum tax accrues every year an entity is registered. If you no longer need a California entity, formally dissolve or withdraw it.

  5. Take advantage of first-year exemptions. Newly formed LLCs may qualify for exemption from the ~$800 first-year tax. Verify eligibility with the FTB.

  6. File and pay estimated taxes on time. Underpayment penalties are ~6.658% (current rate). Make estimated payments each quarter to avoid penalties.

  7. Claim available credits. California offers numerous business tax credits including R&D, hiring, and investment credits that can offset franchise tax liability.

Key Takeaways

  • California C-corporations pay ~8.84% of net income, with a minimum franchise tax of ~$800.
  • S-corporations pay ~1.50% of net income, also with an ~$800 minimum.
  • LLCs owe ~$800 in annual tax plus an income-based fee of up to ~$11,790.
  • The ~$800 minimum applies to all registered entities, even those with no income.
  • Multistate businesses use single sales factor apportionment.
  • Filing deadlines are March 15 for pass-through entities and April 15 for C-corporations.

Next Steps