LLC or corporation in California: what does each cost to start and keep?

Choosing a structure is the first topic on our business law page, and cost is often the question owners ask first. The state's charges are set by the Secretary of State's fee schedule and by the Revenue and Taxation Code, administered by the Franchise Tax Board (FTB). This page lists those government costs as the agencies state them today. It does not cover accountant or attorney fees, federal taxes or city business taxes, which vary.

How does forming and keeping each one work, step by step?

1. Check the name. Search the Secretary of State's records. A name reservation costs $10 if you want to hold a name before filing.
2. File the formation document. An LLC files Articles of Organization (Form LLC-1, $70). A stock corporation files Articles of Incorporation (Form ARTS-GS, $100; close and professional corporations are also $100). The Secretary of State offers online filing through bizfile Online for a faster response.
3. File the first Statement of Information within 90 days. LLCs use Form LLC-12 ($20); stock corporations use Form SI-550 ($25). The statement lists the company's addresses, managers or officers and agent for service of process (Corporations Code sections 17702.09 and 1502).
4. Pay the first annual tax. An LLC's $800 annual tax for its first year is due by the 15th day of the fourth month after it files with the Secretary of State. A new corporation is not subject to the $800 minimum franchise tax for its first taxable year (Revenue and Taxation Code section 23153(f)), but it still owes tax measured by its net income.
5. Keep paying every year. The LLC tax is due by the 15th day of the fourth month of each taxable year (section 17941(c)). Corporations pay the greater of 8.84 percent of net income or the $800 minimum (section 23151).
6. Keep the Statement of Information current. LLCs file every two years and corporations every year, during a six-month window that ends with the month the company was formed (sections 17702.09(c) and 1502(d)).
7. End it formally if you stop. An LLC owes the annual tax until a certificate of cancellation or dissolution is filed with the Secretary of State (section 17941(b)). Simply closing the doors does not stop the tax.

What are the government costs side by side?

When does an LLC owe the extra LLC fee?

On top of the $800 tax, Revenue and Taxation Code section 17942 charges an annual fee based on the LLC's total income from all sources derived from or attributable to California, which the statute defines as gross income plus the cost of goods sold. The FTB says the fee must be estimated and paid by the 15th day of the sixth month of the current tax year (section 17942(d)(1)), and an underpayment adds a 10 percent penalty unless the estimate equaled the prior year's fee.

What changes the answer?

When the company was formed

For LLCs that organized or registered with the Secretary of State on or after January 1, 2021, and before January 1, 2024, the law waived the $800 tax for the first taxable year (section 17941(g)(1)). That window has closed, and the FTB lists the exception as covering only those years. A 2026 amendment to section 17941, effective July 13, 2026, adds a new rule: for taxable years beginning on or after January 1, 2027, and before January 1, 2030, an LLC required to file a return under section 18633.5 pays $400 instead of $800 for its first taxable year (section 17941(g)(2)). If you plan to form an LLC near the turn of the year, confirm with the FTB how the new rule applies to your first taxable year.

Whether the business is registered or doing business here

An LLC owes the tax if it is doing business in California or if the Secretary of State has accepted its articles or issued it a certificate of registration (section 17941(a) and (b)). A corporation owes the minimum tax if it is incorporated here, qualified to do business here, or doing business here (section 23153(b)). Forming a company in another state does not avoid California's tax if the company does business in California.

An S corporation election

A corporation taxed as an S corporation pays California tax at 1.5 percent instead of 8.84 percent, but remains subject to the $800 minimum (section 23802(b) and (c)). An LLC may also elect to be taxed as a corporation; the FTB says an LLC must have the same classification for California and federal purposes. These are tax choices to make with a tax professional.

One owner or several

A single-member LLC is disregarded for income tax purposes, but it still owes the annual tax and fee and must file a return showing its liability (section 18633.5(i)). Multi-owner companies need an operating agreement or shareholder agreement that addresses what happens when an owner leaves; our page on what happens when a business partner or co-owner wants out shows why.

Closing within the first year

The FTB says an LLC that cancels within one year of organizing by filing a Short Form Cancellation (Form LLC-4/8) with the Secretary of State is not subject to the $800 tax for its first tax year. The Secretary of State lists no fee for LLC termination filings.

A very short first year

An LLC that did no business in California and had a taxable year of 15 days or less owes neither the tax nor the fee for that year (section 17946). The FTB describes a similar rule for corporations.

A worked example

For example, imagine a hypothetical Glendale graphic designer who forms a single-member LLC by filing online on March 10, 2026, and keeps a calendar-year tax year. The Articles of Organization cost $70. The first Statement of Information, $20, is due within 90 days, by June 8. Following the FTB's method, the first $800 annual tax is due by the 15th day of the fourth month after filing, which is June 15, 2026. Her income stays well under $250,000, so no LLC fee applies.

As an illustration of the arithmetic only, her first-year state costs are $70 + $20 + $800 = $890. In 2027 she pays the $800 tax by April 15, and her next $20 Statement of Information comes due in 2028. If she had formed a stock corporation instead, the filing would have cost $100 and the first statement $25, with no $800 minimum for the first taxable year, but she would file a $25 statement every year and pay corporate tax on any net income. Which structure suits her depends on liability, tax and ownership questions this arithmetic does not answer.

Common mistakes that raise the cost

• Assuming no income means no tax. The FTB says the yearly tax is due even if the LLC is not conducting business, until it is canceled.
• Missing a Statement of Information. After a notice and 60 days, the Secretary of State certifies the company to the FTB, which assesses a $250 penalty (Corporations Code sections 2204 and 17713.09; Revenue and Taxation Code section 19141). Repeated failures can lead to suspension.
• Letting the company lapse instead of closing it. Unpaid taxes and missed returns can suspend the company, which carries its own costs; see what happens if your California LLC or corporation is suspended.
• Relying on the old first-year exemption. It covered only LLCs formed from 2021 through 2023.
• Forgetting the LLC fee estimate. A growing LLC that crosses $250,000 owes an estimated fee by the 15th day of the sixth month.
• Using a brand name without a county filing. A name other than the one in the articles needs a fictitious business name statement; our guide to filing a DBA in Los Angeles County lists the $26 county fee.

What to do this week

1. Decide who will own the company and in what shares, and write it down.
2. Search the Secretary of State's records for your proposed name.
3. Calendar the Statement of Information (90 days after filing) and the first $800 payment (15th day of the fourth month).
4. Estimate your California income for the year to see whether the LLC fee applies.
5. Ask your tax professional about S corporation or other elections before the first return.
6. If you will hire, review the written notices California employers must give new employees. Our page on employee or independent contractor status explains how California tells the two apart.
7. Put the owners' agreement in writing rather than relying on a handshake; our page on whether a verbal business agreement is enforceable explains the risks.

Frequently asked questions

Is an LLC cheaper than a corporation in California?

At formation, slightly: $70 versus $100, and $20 every two years versus $25 every year for the Statement of Information. But a new corporation skips the $800 minimum in its first taxable year, while an LLC formed today pays it, and an LLC with $250,000 or more in California income also owes the LLC fee.

Do I pay $800 if my LLC made no money?

Yes. The FTB says every LLC that is doing business or organized in California must pay the $800 annual tax, even if it is not conducting business, until the LLC is canceled.

When is the first $800 payment due?

For an LLC, by the 15th day of the fourth month after it files with the Secretary of State; the FTB's own example is an LLC registered on June 18 with tax due September 15. Later payments are due by the 15th day of the fourth month of each taxable year.

What does a sole proprietorship cost to form?

There is no state formation filing for a sole proprietorship, and no $800 entity tax. You may still need a fictitious business name statement if you use a name other than your own, and a city business license or registration.

Can the $250 Statement of Information penalty be waived?

The Secretary of State may waive it if the failure to file was excusable because of reasonable cause or unusual circumstances (Corporations Code sections 2204(f) and 17713.09(f)). The Secretary of State's website has a page for penalty waiver requests.

What happens if I never file the Statement of Information?

Beyond the $250 penalty, a corporation that misses the statement again after being penalized, and has not filed in 24 months, can be suspended by the Secretary of State (Corporations Code section 2205). The FTB says the Secretary of State will suspend or forfeit a business for not filing the required statement.

How can Glendale Law help?

We help owners choose a structure, prepare the formation documents and owners' agreements, and keep the filings on schedule, working alongside your tax advisor. Our article on protecting your business with strong contracts covers the agreements a new company needs next. Call (818) 244-9000 or request a consultation.