California LLC First-Year Tax: $800, or $400 Starting 2027
The free first year some LLCs got under AB 85 ended in 2023 — but a smaller break is coming back for LLCs whose first taxable year begins in 2027 through 2029.
A new California LLC owes $800 for its first taxable year — unless that year begins on or after January 1, 2027 and before January 1, 2030, when it is $400 (Revenue and Taxation Code §17941(g)). Every LLC owes the full $800 from its second year on. AB 85's full first-year waiver, which covered only LLCs formed 2021-2023, is still expired.
What changed in 2026: the $400 first-year rate
A 2026 amendment to §17941 added a reduced first-year rate for LLCs. For taxable years beginning on or after January 1, 2027 and before January 1, 2030, an LLC required to file a return pays $400, instead of $800, for its first taxable year only. It is a reduction, not a waiver, and it applies to a fixed three-year window.
Here is how the cases sort out, based on when the LLC's first taxable year begins (for a new LLC, that is its formation date):
- Before January 1, 2027 (including LLCs formed 2024, 2025 and 2026): $800 in year one.
- January 1, 2027 through December 31, 2029: $400 in year one.
- January 1, 2030 or later: back to $800 in year one, unless the Legislature extends the rule.
- Year two and every year after: $800, regardless of when the LLC was formed.
Two details are easy to miss. First, only the annual tax is reduced — the separate graduated LLC fee that applies once California income reaches $250,000 is unchanged.
Second, because the rule looks at when the first taxable year begins, an LLC formed on December 31, 2026 pays $800 for its short first year, while one formed on January 1, 2027 pays $400. Either way, the second-year tax is due the following April 15, so talk to a CPA about how formation timing fits your situation before acting on this.
What AB 85 actually did (and for how long)
AB 85, passed as part of the 2020-21 state budget, waived the $800 minimum franchise tax for a qualifying LLC's, LP's, or LLP's first taxable year, but only for entities formed within a specific three-year window: January 1, 2021 through December 31, 2023. It was written as a temporary measure from the start, not an ongoing policy — and it expired on schedule at the end of 2023.
Because that exemption got a lot of press coverage when it was introduced ("California waives LLC fee for new businesses"), a surprising amount of content aimed at new business owners still presents it as a current, ongoing benefit. It isn't. The 2027-2029 rule above is a different, smaller thing — and it does not help LLCs formed in 2024, 2025 or 2026.
When the money is actually due
The annual tax is due by the 15th day of the 4th month of the LLC's taxable year, counting the month the year begins as month one. So an LLC whose first taxable year begins June 1 pays by September 15, one that begins in September pays by December 15, and one that begins in January pays by April 15.
A date that falls on a weekend moves to the next business day. After the first year, it's due every April 15 for a calendar-year LLC regardless of income or activity level, for as long as the LLC exists (even a dormant one that hasn't done business).
Note that the tax is not tied to the return: the Form 568 return has its own, separate deadline and its automatic extension does not extend the time to pay. Our LLC Annual Filing Deadline Checker lays all three yearly deadlines out for any tax year.
Why corporations get a break LLCs don't
This is the part that trips people up when they're choosing an entity type: California corporations get a permanent first-year exemption from the minimum franchise tax under §23153(f), a statute that expressly excludes LLCs, limited partnerships and LLPs.
An LLC and a corporation formed on the same day are treated differently in year one — the corporation may owe nothing, while the LLC owes $800 (or $400 in the 2027-2029 window). That's a real, current asymmetry worth knowing about before you pick an entity type, not a mistake in this article.
Check your exact numbers
Use our LLC Franchise Tax Calculator to see your exact first-year amount, due date and total based on your formation date, including the additional LLC fee tier that kicks in above certain gross-receipts thresholds. Forming an LLC also means a Statement of Information within 90 days — see our Statement of Information Deadline Checker.
Frequently Asked Questions
How much is the first-year tax for a new California LLC?
$800, unless the LLC's first taxable year begins on or after January 1, 2027 and before January 1, 2030, in which case it is $400 for that first taxable year only (Revenue and Taxation Code section 17941(g)). From the second year on, the tax is $800 every year.
Is the AB 85 first-year LLC exemption back?
No. AB 85's full first-year waiver only applied to LLCs, LPs and LLPs formed between January 1, 2021 and December 31, 2023, and it expired. The 2027-2029 rule cuts the first-year tax to $400 rather than waiving it.
When is the California LLC annual tax due for a new LLC?
By the 15th day of the 4th month of the LLC's first taxable year, counting the month it begins as month one — so an LLC that begins June 1 pays by September 15, and one that begins in January pays by April 15. After that it is due every April 15 for a calendar-year LLC.
Do corporations get a first-year waiver that LLCs don't?
Yes. Revenue and Taxation Code section 23153(f) exempts a newly incorporated corporation from the minimum franchise tax for its first taxable year and expressly excludes LLCs, so LLCs only get the smaller 2027-2029 reduction.
This article is for general information only and is not legal or tax advice. Confirm your specific filing obligations with the Franchise Tax Board or a licensed CPA before forming an entity.