California entity formation: LLCs, corporations and out-of-state registration (2026)

Scope and who it is for

This Guide covers the California state layer of forming a business entity, or registering an out-of-state entity, for tax year 2026. It is for founders, freelancers and small-business owners who either form a California LLC or corporation, or run an entity formed in another state that has California customers, staff, property or management.

It covers:

• Secretary of State (SOS) filings: formation, registration of a foreign entity, and the Statement of Information.
• The Franchise Tax Board (FTB) annual LLC tax, the LLC fee, and the corporate minimum franchise tax.
• The "doing business in California" test.
• The federal beneficial ownership (BOI) position.

It does not cover the federal entity classification choice, California personal income tax returns, payroll (EDD), or sales tax (CDTFA). Those need their own analysis.

Research date: 25 September 2026. The statutes are cited from the official California Legislative Information site. The FTB publishes the yearly indexed "doing business" amounts separately; at the research date only the 2025 amounts had been posted (see "Thresholds and figures").

Ask the client first

• What entity type is it: LLC (single- or multi-member) or corporation? Which state or country was it formed in, and on what date?
• For a California entity, what is the exact SOS filing date? For a foreign entity, what is the date it was registered with the California SOS, if it has registered?
• Where is the business managed from? Where do the owners and staff live and work?
• What are the entity's total sales, property and payroll? How much of each is in California, measured under the California assignment rules?
• How is it classified federally: disregarded, partnership, C corporation or S corporation? Who owns a disregarded LLC: an individual, or an S corporation or partnership?
• Has it filed every Statement of Information and FTB return, and paid every annual tax, LLC fee and estimate on time? Has the SOS or FTB sent any notice or demand?
• Will it render professional services that need a California licence (for example law, medicine or accountancy)?
• Is it formed under the law of a foreign country? This matters for BOI.

The method, step by step

1. Choose the entity and the state. If the business will be run from California, a California entity avoids a second state's filings. An entity formed elsewhere and doing business in California must still register here (step 4).
2. Check professional-services limits. A California or foreign LLC may not render "professional services" as defined in Corp. Code §13401 and §13401.3 in California (Corp. Code §17701.04(e)). A licensed professional generally needs a professional corporation, so refer that case.
3. File the formation document with the SOS.
   • LLC: Articles of Organization.
   • Corporation with shares: Articles of Incorporation.
4. Test "doing business" for an out-of-state entity, using the tests below. If the test is met, file the foreign registration with the SOS: an application for registration for an LLC, or a statement and designation for a corporation.
5. Diary the Statement of Information.
   • It is due within 90 days of the original filing or registration.
   • After that it is due every two years for an LLC and every year for a corporation. It must be filed inside a six-month window.
6. Diary the FTB payments.
   • LLC: annual tax, estimated LLC fee, and return.
   • Corporation: estimated tax, and return.
   • Apply the first-year rules and the 15-day rule before you quote any figure.
7. Record the BOI position. Domestic entities are now exempt. A foreign-country entity registered in a US state may still have to report.

Thresholds and figures (tax year 2026)

SOS filing fees

Filing	Fee	Authority
LLC Articles of Organization	$70	Gov. Code §12190(b)
Foreign LLC application for registration	$70	Gov. Code §12190(c)
LLC name reservation	$10	Gov. Code §12190(a)
LLC Statement of Information	$20	Gov. Code §12190(k)
Articles of Incorporation, corporation with shares	$100	Gov. Code §12186(c)
Foreign (business) corporation statement and designation	$100	Gov. Code §12186(f)
Corporation Statement of Information, domestic or foreign	$20 filing fee plus a $5 disclosure fee	Gov. Code §12186(g)-(h); Corp. Code §1502(i); Corp. Code §2117
Changes to a Statement of Information	No fee	Gov. Code §12190(l)

The SOS may also charge separate fees for preclearance and expedited handling (Gov. Code §12182). Check the current SOS service options before you quote one.

LLC annual tax (R&TC §17941)

• Who owes it. Every LLC doing business in California owes the annual tax. So does every LLC whose articles the SOS has accepted, or which the SOS has registered, whether or not it does business here. It is owed for each taxable year, or part of one, until a certificate of cancellation is filed. Filing a "final" FTB return does not stop it. The amount is the minimum franchise tax set by §23153(d): $800. (R&TC §17941(a)-(b); R&TC §23153(d))
• When it is due. It is due on or before the 15th day of the 4th month of the taxable year (R&TC §17941(c)).
  • For a calendar-year LLC in its second and later years, that is 15 April.
  • First year: the FTB gives a new LLC until the 15th day of the 4th month from the date it files with the SOS to pay its first-year annual tax, using the LLC Tax Voucher, form 3522 (FTB LLC page).
  • Later years: the 15th day of the 4th month of the taxable year. For a disregarded LLC, read "taxable year" as the owner's taxable year (R&TC §18633.5(i)(4)).
• First year, LLCs organised or registered in 2024 to 2026. There is no first-year exemption. The waiver in §17941(g)(1) covered only LLCs that organised or registered on or after 1 January 2021 and before 1 January 2024. An LLC formed or registered in 2026 therefore owes $800 for its 2026 first year.
• First year, taxable years beginning in 2027 to 2029. SB 180 (Stats. 2026, ch. 85, effective 13 July 2026) added §17941(g)(2). For taxable years beginning on or after 1 January 2027 and before 1 January 2030, an LLC required to file under §18633.5 pays $400 for its first taxable year instead of the §23153 amount. This does not apply to 2026. (R&TC §17941(g))
• Deployed service members. There is a narrow exemption for a small-business LLC wholly owned by a deployed member of the US Armed Forces. It applies only while the owner is deployed and the LLC operates at a loss or ceases operation. "Small business" means California total income of $250,000 or less. The exemption is inoperative from 2030. (R&TC §17941(f))

LLC fee on California total income (R&TC §17942)

The fee is added to the $800 tax. It is based on "total income from all sources derived from or attributable to this state". That means gross income plus cost of goods sold, so it is not reduced for COGS or for operating costs. It excludes income, gain or distributions the LLC receives as a member of (or holder of an economic interest in) another LLC, where that income is directly or indirectly attributable to income already subject to the LLC fee (§17942(b)(1)(A)). The income is assigned to California under the sales-assignment rules of §25135 and §25136. (R&TC §17942)

California total income	Fee
Less than $250,000	No fee
$250,000 or more, but less than $500,000	$900
$500,000 or more, but less than $1,000,000	$2,500
$1,000,000 or more, but less than $5,000,000	$6,000
$5,000,000 or more	$11,790

• Estimate. Estimate and pay the fee by the 15th day of the 6th month of the current taxable year.
• Penalty. Any underpayment carries a 10% penalty. There is no penalty if the amount paid by that date is at least the LLC's total fee for the preceding taxable year. (R&TC §17942(d))
• Commonly controlled LLCs. Where LLCs under common control (more than 50%) were formed mainly to cut the fee, the FTB may measure it on their combined income. Each LLC in the group is jointly and severally liable. (R&TC §17942(b)(2))

Corporations, C and S (R&TC §23151, §19025)

• Tax rate. A C corporation pays 8.84% of net income, but not less than the minimum franchise tax of $800 (R&TC §23151(f)(2); R&TC §23153(d)).
• S corporations. An S corporation pays 1.5% instead of 8.84%, and is still subject to the minimum franchise tax (R&TC §23802(b)-(c)).
• First-year exemption (still in force).
  • A corporation that incorporates or qualifies in California on or after 1 January 2000 is not subject to the minimum franchise tax for its first taxable year (R&TC §23153(f)(1)).
  • This does not cover LLCs, limited partnerships, LLPs, qualified subchapter S subsidiaries, or a corporation that reorganises only to avoid the minimum tax (R&TC §23153(f)(2)-(3)).
  • Tax measured by net income is still owed in the first year.
• Estimated tax (R&TC §19025).
  • If the estimated tax does not exceed the minimum tax, all of it is due by the 15th day of the 4th month.
  • If it does exceed the minimum tax, and the requirement is met before the 4th month, pay it in installments on the 15th day of the 4th, 6th, 9th and 12th months: 30%, 40%, 0% and 30%. The first installment must be at least the minimum tax.
  • Later-arising requirements use the other rows of §19025.

"Doing business in California" (R&TC §23101)

An entity is doing business in California for a taxable year if any of these tests is met (R&TC §23101):

• (a) Active conduct. It actively engages in any transaction for financial or pecuniary gain or profit in California.
• (b)(1) Organised or commercially domiciled in California.
• (b)(2) Sales. California sales exceed the lesser of the indexed sales amount or 25% of total sales. Sales include sales by an agent or independent contractor. They are assigned under §25135 and §25136, so services and intangibles are assigned by market.
• (b)(3) Property. California real and tangible personal property exceeds the lesser of the indexed property amount or 25% of total property.
• (b)(4) Payroll. California compensation exceeds the lesser of the indexed payroll amount or 25% of total compensation.
• Pass-through shares count. The taxpayer's share of the sales, property and payroll of a partnership or S corporation is included (§23101(d)).

The dollar amounts.

• The statute sets base amounts of $500,000 for sales, $50,000 for property and $50,000 for payroll. The FTB must revise them every year for inflation (§23101(c)), so the base amounts are not the current thresholds.
• The FTB's Doing business in California page publishes the indexed amounts. For 2025 they are $757,070 (sales), $75,707 (property) and $75,707 (payroll).
• At the research date (page last updated 7 November 2025), the FTB had not yet posted 2026 amounts. Do not treat the 2025 row or the statutory base as the 2026 figure.
• Where a 2026 answer turns on the dollar prong, open that FTB page and use the 2026 row once it is posted. Until then, say the 2026 amount is unpublished and show the 2025 figure labelled as 2025.
• Where the 25% prong gives a figure below the statutory base amount, the answer does not depend on the indexed amount, because the indexed amount is the base revised for inflation.

Boundary and exception table (R&TC §17941)

Situation	Rule	Result
LLC formed or registered 1 Jan 2021 to 31 Dec 2023	§17941(g)(1)	First taxable year exempt from the annual tax
LLC formed or registered in 2024, 2025 or 2026	No waiver applies	$800 for the first taxable year
LLC whose first taxable year begins in 2027, 2028 or 2029	§17941(g)(2), SB 180	$400 for the first taxable year; $800 after that
LLC with a taxable year of 15 days or less in which it did no business in California	R&TC §17946	Not subject to the annual tax or fee for that short year. For a calendar year, that means filed on 17 December or later. A 16 December filing gives a 16-day year and does not qualify.
Corporation with a taxable year of 15 days or less and no business in California	R&TC §23114	No tax for the short year. That period is not counted as the "first taxable year" for the §23153(f)(1) exemption, so the next year gets the exemption.
Corporation incorporated or qualified on or after 1 Jan 2000	§23153(f)(1)	No minimum franchise tax in its first taxable year; income-measured tax still applies
California sales above 25% of total sales but below the indexed dollar amount	§23101(b)(2): lesser of the two	Doing business
California sales at exactly the lesser amount	"exceed"	Not met on sales; check the other tests
Out-of-state seller whose only in-state activity is soliciting orders for tangible goods	Public Law 86-272 protects against net-income taxes only	It may still be doing business and owe the annual tax, the fee and returns. Refer to a specialist.

Unsettled point: the 15-day rule and the 2027 $400 rule.

• For corporations, §23114(b) says the short period is not a "taxable year" for the first-year exemption.
• §17946 for LLCs has no equivalent sentence.
• So if an LLC is filed on or after 17 December 2026 and does no business until 2027, the statutes do not say whether 2027 is its "first taxable year" for the $400 rate.
• Until the FTB publishes guidance, plan on $800 for 2027 and treat $400 as possible upside. Check the FTB's LLC guidance or ask the FTB.

Statement of Information (Corp. Code §17702.09)

• LLCs (domestic and registered foreign).
  • File within 90 days after the articles or registration are filed. After that, file every two years during the "applicable filing period" (Corp. Code §17702.09(a)).
  • That period is the calendar month of the original filing or registration plus the five months before it (§17702.09(c)).
  • The statement lists the managers, or the members if there is no manager, plus the chief executive officer, agent, addresses and type of business. It also says whether any manager or member has an outstanding final Labor Code wage judgment.
  • If nothing has changed, a no-change statement may be filed. A change of agent or of the agent's address requires a new full statement.
• Corporations (domestic and foreign).
  • File within 90 days, then every year during the month of the original filing plus the five months before it (Corp. Code §1502(a), (d); Corp. Code §2117).
  • The SOS publishes the window by month on its Statements of Information page.
• Penalty.
  • A late statement does not trigger an automatic penalty at day 91.
  • First, the SOS sends a delinquency notice. If the statement is still not filed within 60 days of that notice, a $250 penalty applies.
  • For an LLC, see Corp. Code §17713.07(b).
  • For a corporation, the SOS certifies it to the FTB, and the FTB assesses the penalty under R&TC §19141 (Corp. Code §2204).
  • The SOS may waive the penalty for reasonable cause or unusual circumstances.

Foreign entities: registration and the cost of not registering (R&TC §19135)

• Foreign LLC application.
  • Give the entity's name. If that name does not comply with California rules, give an alternate name.
  • Give the home jurisdiction, the addresses, and a California agent for service of process.
  • Attach a certificate of good standing, or a record of similar effect, issued within the past six months (Corp. Code §17708.02).
  • Registering creates the §17941 annual tax liability.
• Unregistered foreign LLC.
  • It cannot maintain (bring) an action in California until it registers, but it can defend one.
  • Its members and managers are not personally liable merely because it did not register (Corp. Code §17708.07).
• Unqualified foreign corporation.
  • A court may impose a penalty of $20 per day of willful unauthorized intrastate business. The amount is set by the court.
  • To maintain an action on intrastate business, the corporation must first qualify, pay a $250 penalty to the SOS, and pay the back franchise taxes (Corp. Code §2203).
• FTB penalty.
  • The FTB imposes $2,000 per taxable year on an entity that is doing business in California and has not filed a required return within 60 days after an FTB notice and demand, unless it shows reasonable cause.
  • It applies to a foreign corporation or LLC that has not qualified or whose rights are forfeited, and to a suspended domestic corporation or LLC.
  • It is in addition to other penalties (R&TC §19135).
• Suspension and forfeiture. Unpaid tax, penalties or interest can lead to suspension of a domestic entity's powers, or forfeiture of a foreign entity's right to exercise them in California, within the periods set in R&TC §23301.
• Delaware or Wyoming does not avoid California. An LLC or corporation formed elsewhere but managed from California is commercially domiciled here, so it is doing business under §23101(b)(1). It owes the California annual tax, fee or franchise tax, and the Statement of Information, on top of its home-state costs.

Federal BOI reporting (Corporate Transparency Act)

• Final rule. On 11 August 2026 FinCEN issued a final rule. It made permanent the exemptions first introduced by the interim final rule published on 26 March 2025, and it took effect on 14 August 2026.
• US entities are exempt. Companies created in the United States, including California LLCs and corporations, are exempt and do not file BOI reports.
• Foreign-country entities may still report. An entity formed under the law of a foreign country and registered to do business in a US state is still a "reporting company" unless an exemption applies. It does not report US persons as beneficial owners.
• Deadline for foreign reporting companies. A foreign reporting company registered on or after 26 March 2025 has 30 calendar days to file its initial report after receiving notice that its registration is effective.
• Source: FinCEN BOI page.

Worked cases

Case 1: California single-member LLC formed in 2026 (ordinary) (source)

• Facts. A disregarded LLC owned by an individual. Articles filed 10 March 2026. Expected 2026 California total income of $180,000.
• SOS. Articles fee $70. Statement of Information due within 90 days, fee $20.
• FTB. Annual tax of $800 for 2026, with no first-year waiver. Articles were filed 10 March 2026, so the first payment (form 3522) is due by 15 June 2026: the 15th day of the 4th month from the SOS filing date (FTB LLC page). From 2027 it is due by 15 April, the owner's calendar year. No LLC fee, because $180,000 is below $250,000.
• 2026 total state cost: $70 + $20 + $800 = $890.
• Return. Form 568 is due the 15th day of the 4th month after the owner's year-end (R&TC §18633.5(i)(3)).

Case 2: Year-end formation (boundary) (source)

• 17 December 2026. An LLC filed on 17 December 2026 that does nothing until January has a 15-day 2026 year with no business, so it owes nothing for 2026 (§17946).
• 16 December 2026. Filed one day earlier, its 2026 year is 16 days long and it owes $800 for 2026.
• Any business in the short year. Opening trading, signing, invoicing or other business in the short period also removes the relief.
• 2027 rate. Whether 2027 then attracts $400 or $800 is the unsettled point above.

Case 3: Texas LLC with California clients (exclusion) (source)

• Facts. No California presence, property or payroll. Total sales of $1,000,000, of which $200,000 is assigned to California.
• Sales test. 25% of total sales is $250,000. The sales prong needs California sales above the lesser of $250,000 and the indexed amount. The indexed amount is the $500,000 base revised for inflation, so the lesser figure is $250,000.
• Result. $200,000 does not exceed $250,000, so §23101(b)(2) is not met. With no other contact, the LLC is not doing business on these facts, and it need not register.
• If sales rise. Had California sales been $260,000, they would exceed $250,000 and the LLC would be doing business, even though that is far below the dollar prong.

Case 4: Wyoming LLC with one California employee (source)

• Facts. Total compensation $400,000. A remote California employee is paid $120,000.
• Payroll test. 25% of total compensation is $100,000. $120,000 exceeds $100,000, so §23101(b)(4) is met whatever the indexed payroll amount.
• Result. The LLC must register (fee $70), file the Statement of Information (fee $20), and pay the $800 annual tax. It then tests the LLC fee against its California-assigned total income.

Case 5: Delaware C corporation incorporated in 2026, run from San Francisco and qualified in 2026 (source)

• Facts. Incorporated in Delaware in 2026. It began business in California only on qualifying in California, so its first taxable year starts in 2026: the minimum tax runs from the earlier of incorporation, qualification or commencing to do business in California (§23153(a)).
• Status. It is commercially domiciled in California. Qualification fee $100; annual Statement of Information $20 plus $5.
• First year. Its first taxable year is exempt from the $800 minimum tax (§23153(f)(1)). It still owes 8.84% of California net income: on $300,000, that is $26,520.
• Estimates. Because the estimate exceeds the minimum tax, it is paid 30%, 40%, 0% and 30% (§19025).
• Return. Form 100 is due the 15th day of the 4th month after year-end (R&TC §18601). An S corporation files by the 15th day of the 3rd month.

Case 6: LLC fee estimate penalty (source)

• Facts. 2025 fee $900. The LLC pays $900 by 15 June 2026. Its 2026 California total income turns out to be $600,000, so the 2026 fee is $2,500.
• Result. It pays the $1,600 balance with the return, with no 10% penalty, because it paid at least the prior-year fee on time.
• Had it paid nothing by 15 June, the penalty would be 10% of $2,500 = $250.

When to refuse or refer

• Professional services by an LLC: refer to counsel. A professional corporation is usually needed.
• Voluntary disclosure or back years. An out-of-state entity that has been doing business unregistered for past years needs a specialist to handle voluntary disclosure, back returns, penalties and revivor. This Guide does not set the look-back or waiver terms.
• Public Law 86-272, unitary or combined reporting, and apportionment beyond the single-year tests above.
• Federal classification elections, S corporation eligibility, and personal nonresident returns.
• BOI for a foreign-country entity: confirm the exemptions on FinCEN's site before filing.

Filing and payment steps with deadlines

Step	When	Where
Articles or foreign registration	Before starting business, or when the §23101 tests are first met	SOS (bizfileOnline)
First Statement of Information	Within 90 days of the filing or registration	SOS
LLC annual tax (form 3522)	First year: 15th day of the 4th month from the SOS filing date. Later years: 15th day of the 4th month of the taxable year	FTB
LLC fee estimate (form 3536, Estimated Fee for LLCs)	15th day of the 6th month of the taxable year	FTB
Form 568 (partnership-classified LLC, or disregarded LLC owned by an S corporation or partnership)	15th day of the 3rd month after year-end	FTB
Form 568 (disregarded LLC owned by an individual or C corporation)	15th day of the 4th month after the owner's year-end	FTB
Corporation estimates	Months 4, 6, 9 and 12 (§19025)	FTB
Form 100 / 100S	15th day of the 4th month / 3rd month after year-end	FTB
Later Statements of Information	Every 2 years (LLC) or every year (corporation), within the six-month window	SOS

Extensions. The FTB may extend the time to file, but not the time to pay. The maximum extension is seven months for Part 11 corporation returns and for partnership-classified LLC returns (R&TC §18604; R&TC §18567). Confirm the FTB's current automatic extended date.

2025 returns, extended returns due in autumn 2026 (FTB doing business page)

The 2025 rules were the same as 2026 on every point in this Guide except these:

• The indexed "doing business" amounts: for 2025 use $757,070 / $75,707 / $75,707 from the FTB page.
• The BOI rule: domestic companies were already exempt under the March 2025 interim rule.

An LLC formed in 2024 or 2025 had no first-year waiver. Tax or fee paid with an extended 2025 return is late: interest and late-payment penalties run from the original due date.

Completion checklist (R&TC §23101)

• Entity type, home jurisdiction and exact SOS filing or registration date recorded
• Professional-services limit checked
• All §23101 tests run, each against the lesser of its 25% prong and the FTB-indexed amount for the year, plus the active-conduct and domicile tests
• First-year position stated. LLC: none for 2024-2026, $400 for first years beginning 2027-2029. Corporation: minimum tax exempt in year one.
• 15-day rule tested for formations in the last 15 days of the year
• LLC fee band from California total income (gross income plus COGS, excluding amounts received from a lower-tier LLC that are already subject to the fee), with the estimate compared to the prior-year fee
• Statement of Information: 90-day date and recurring six-month window diarised
• Return form and due date matched to classification and owner
• BOI: domestic entity exempt; foreign-country entity checked
• Unsettled points (the 2027 first-year rate after a 15-day stub; the 2026 indexed amounts) flagged to the client