CA SMLLC Form 568

What this file is, and what it is not

This file is a content skill that loads on top of us-tax-workflow-base v0.1. It provides the California Form 568 filing rules for single-member LLCs (SMLLCs) that are disregarded for federal income tax purposes but are treated as separate entities by California for the annual franchise tax and LLC fee. This skill does NOT compute the owner's personal California income tax (handled by ca-540-individual-return) or California estimated personal income tax payments (handled by ca-estimated-tax-540es).

Tax year coverage. This skill is current for tax year 2025 as of its currency date (April 2026). It reflects California Revenue and Taxation Code sections 17941 and 17942 as in force for 2025.

Key concept. A single-member LLC is disregarded for federal tax (activity reported on Schedule C). But California treats the LLC as a separate entity subject to: (1) an $800 annual franchise tax, and (2) a gross receipts-based LLC fee if total income exceeds $250,000. The SMLLC must file Form 568 with the FTB.

Section 1 -- Scope statement

• Entities covered — Single-member LLCs organized in California OR doing business in California; disregarded for federal income tax purposes (activity flows to owner's Schedule C)

This skill covers California Form 568 for tax year 2025 for entities that are:

• Single-member LLCs organized in California OR doing business in California
• Disregarded for federal income tax purposes (activity flows to owner's Schedule C)

For the following kinds of work:

• Determining the $800 annual franchise tax obligation
• Computing the LLC fee based on total California income
• Preparing Form 568 (LLC Return of Income)
• Preparing Form 3522 (LLC Tax Voucher) for the $800 payment
• Preparing Form 3536 (Estimated Fee for LLCs) for the LLC fee
• Determining that the temporary first-year exemption is expired for 2025 and checking the separate 15-day exception
• Identifying Schedule B (Balance Sheet) requirements
• Computing penalties and interest for late filing or late payment

This skill does NOT cover:

• Multi-member LLCs (Form 568 for partnerships -- out of scope)
• LLCs taxed as corporations (Form 100 -- out of scope)
• The owner's personal California income tax -- handled by ca-540-individual-return
• California estimated personal income tax -- handled by ca-estimated-tax-540es
• Federal SMLLC treatment -- handled by federal skills

Section 2 -- Year coverage and currency

• Tax year covered and due date — 2025 (Form 568 due March 15, 2026 for calendar-year filers, or the 15th day of the 3rd month after the close of the fiscal year; extended to September 15, 2026 with Form 7004).

Currency date: April 2026.

Legislation reflected:

• R&TC section 17941 -- $800 annual franchise tax
• R&TC section 17942 -- LLC fee schedule
• R&TC section 17941(g)(3) / AB 85 -- temporary first-year exemption (expired for tax years beginning on or after January 1, 2024)
• R&TC section 19131 -- late filing penalty
• R&TC section 19132 -- late payment penalty
• AB 85 (2020) -- temporary first-year exemption for 2021-2023; not extended to 2025
• FTB Form 568 Instructions (2025)
• FTB Form 3522 Instructions (2025)
• FTB Form 3536 Instructions (2025)

Annual franchise tax

Annual franchise tax figures table (R&TC section 17941(a); R&TC section 17941; FTB instructions; FTB)

Figure	Value	Source
Annual franchise tax (minimum)	$800	R&TC section 17941(a)
Due date for $800 tax	April 15 of the tax year (i.e., April 15, 2025 for TY2025)	R&TC section 17941; FTB instructions
Payment method	Form 3522 (LLC Tax Voucher) or Web Pay	FTB

• LLC minimum franchise tax — $800 (California Revenue and Taxation Code §17941)
• Due date for $800 tax — April 15 of the tax year (i.e., April 15, 2025 for TY2025) (R&TC section 17941; FTB instructions)
• Payment method — Form 3522 (LLC Tax Voucher) or Web Pay (FTB)

Critical timing note: The $800 franchise tax for tax year 2025 is due on April 15, 2025 -- the BEGINNING of the tax year, not the end. This is a prepayment, not a year-end obligation. Form 3522 is used for this payment.

LLC fee schedule (based on total income) (verify 2025)

LLC fee schedule (based on total income) (R&TC section 17942)

Total income from California sources	LLC fee
Less than $250,000	$0
$250,000 -- $499,999	$900
$500,000 -- $999,999	$2,500
$1,000,000 -- $4,999,999	$6,000
$5,000,000 and above	$11,790

• Total income definition — Total income means gross income plus cost of goods sold. For an SMLLC, this is generally the total revenue of the business (not net profit). This is a critical distinction -- a business with $300,000 gross revenue and $280,000 expenses (net profit $20,000) still owes the $900 LLC fee because total income is $300,000.

LLC fee payment timing

LLC fee payment timing table (Form 3536; Form 568)

Item	Due date	Form
Estimated LLC fee	June 15, 2025 (for calendar year)	Form 3536
Final LLC fee (balance due)	March 15, 2026 (with Form 568)	Form 568

• Estimated LLC fee — June 15, 2025 (for calendar year) (Form 3536)
• Final LLC fee (balance due) — March 15, 2026 (with Form 568) (Form 568)

First-year exemption (verify 2025)

First-year exemption table (AB 85; FTB Publication 3556; AB 85; FTB Publication 3556)

Figure	Value	Source
First-year $800 tax exemption	Not available for LLCs formed or registered in 2025; temporary exemption applied only to tax years beginning on or after January 1, 2021 and before January 1, 2024	AB 85 (2020); R&TC section 17941(g)(3)
First-year LLC fee exemption	No 2025 first-year exemption; LLC fee applies in the first year if total California income is $250,000 or more	R&TC section 17941(g)(3); FTB guidance
Sunset of first-year exemption	Expired for tax years beginning on or after January 1, 2024; no extension applies to 2025-formed LLCs	AB 85 / FTB Publication 3556

• First-year $800 tax exemption — Not available for LLCs formed or registered in 2025; temporary exemption applied only to tax years beginning on or after January 1, 2021 and before January 1, 2024 (AB 85; FTB Publication 3556)
• First-year LLC fee exemption — No 2025 first-year exemption; LLC fee applies in the first year if total California income is $250,000 or more (2025 Form 568 instructions)
• Sunset of first-year exemption — Expired for tax years beginning on or after January 1, 2024; no extension applies to 2025-formed LLCs (AB 85; FTB Publication 3556)

Resolved 2025 rule: The temporary first-year $800 exemption applied only to tax years beginning on or after January 1, 2021 and before January 1, 2024. Do not apply it to a 2025-formed or 2025-registered LLC. Separately, the 15-day exception can still eliminate the return, annual tax, and LLC fee for a short taxable year if the LLC's taxable year is 15 days or less and it conducts no business in California during that period.

Penalties

Penalties table (R&TC section 19172; R&TC section 19132; R&TC section 19132.5; R&TC section 19142; R&TC section 19521)

Penalty	Amount	Source
Late filing penalty	$18/month (per member, per month, up to 12 months). For SMLLC: $18/month x 1 member = $18/month, max $216.	R&TC section 19172
Late payment penalty (franchise tax)	5% + 0.5%/month (up to 25%) of unpaid tax	R&TC section 19132
Late payment penalty (LLC fee)	10% of unpaid fee	R&TC section 19132.5
Underpayment of estimated fee penalty	Interest on underpayment from June 15 to payment date	R&TC section 19142
Interest rate	Varies; set by FTB quarterly (verify 2025 rate)	R&TC section 19521

• Late filing penalty — $18/month (per member, per month, up to 12 months). For SMLLC: $18/month x 1 member = $18/month, max $216. (R&TC section 19172)
• Late payment penalty (franchise tax) — 5% + 0.5%/month (up to 25%) of unpaid tax (R&TC section 19132)
• Late payment penalty (LLC fee) — 10% of unpaid fee (R&TC section 19132.5)
• Underpayment of estimated fee penalty — Interest on underpayment from June 15 to payment date (R&TC section 19142)
• Interest rate — Varies; set by FTB quarterly (verify 2025 rate) (R&TC section 19521)

Section 4 -- Primary source library

Primary source library table (https://www.ftb.ca.gov/forms/misc/3556.html)

Source	Use
R&TC section 17941	$800 annual franchise tax for LLCs
R&TC section 17942	LLC fee based on total income
R&TC section 17946	Definition of "doing business" in California
R&TC section 17941(g)(3)	Temporary first-year exemption from $800 tax, expired after 2023
R&TC section 17941(b)(2)	$800 not deductible against LLC fee
FTB Form 568 Instructions (2025)	Line-by-line filing instructions
FTB Form 3522 (2025)	LLC Tax Voucher
FTB Form 3536 (2025)	Estimated Fee for LLCs
FTB Publication 3556	LLC Filing Information
IRC section 301.7701-3	Check-the-box: SMLLC as disregarded entity

• $800 annual franchise tax for LLCs — $800 annual franchise tax for LLCs (R&TC section 17941)
• LLC fee based on total income — LLC fee based on total income (R&TC section 17942)
• Definition of "doing business" in California — Definition of "doing business" in California (R&TC section 17946)
• Temporary first-year exemption from $800 tax, expired after 2023 — Temporary first-year exemption from $800 tax expired after 2023; it is not available for LLCs formed or registered in 2025. (AB 85; FTB Publication 3556)
• $800 not deductible against LLC fee — $800 not deductible against LLC fee (R&TC section 17941(b)(2))
• Line-by-line filing instructions — Line-by-line filing instructions (FTB Form 568 Instructions (2025))
• LLC Tax Voucher — LLC Tax Voucher (FTB Form 3522 (2025))
• Estimated Fee for LLCs — Estimated Fee for LLCs (FTB Form 3536 (2025))
• LLC Filing Information — LLC Filing Information (FTB Publication 3556)
• Check-the-box: SMLLC as disregarded entity — Check-the-box: SMLLC as disregarded entity (IRC section 301.7701-3)

5.1 -- Who must file

• Who must file Form 568 — An SMLLC must file Form 568 if ANY of the following apply: the LLC is organized in California, registered to do business in California, doing business in California, or has California-source income. For the 2025 R&TC §23101 bright-line test, California sales exceed the lesser of $757,070 or 25% of total sales, California property exceeds the lesser of $75,707 or 25% of total property, or California payroll exceeds the lesser of $75,707 or 25% of total payroll. (R&TC section 17946)

5.2 -- Key Form 568 components

Key Form 568 components table

Component	Description
Side 1	General information: LLC name, EIN/FEIN, SOS number, business activity codes
Side 2	Income and deductions (mirrors Schedule C but for CA purposes)
Side 3	Schedule B (Balance Sheet) -- required if total assets or total liabilities ≥ specified threshold (verify)
Side 4	Schedule K (Members' Shares) -- for SMLLC, 100% to single member
Schedule IW	LLC Income Worksheet -- used to compute total income for the LLC fee

• General information: LLC name, EIN/FEIN, SOS number, business activity codes — Side 1
• Income and deductions (mirrors Schedule C but for CA purposes) — Side 2
• Schedule B (Balance Sheet) -- required if total assets or total liabilities ≥ specified threshold (verify) — Side 3
• Schedule K (Members' Shares) -- for SMLLC, 100% to single member — Side 4
• LLC Income Worksheet -- used to compute total income for the LLC fee — Schedule IW

5.3 -- Schedule IW (LLC fee computation)

• Schedule IW computation steps — 1. Start with total income from all sources (gross receipts or sales, minus returns/allowances, plus other income). 2. For SMLLCs, this generally matches Schedule C gross income (Line 7 of Schedule C) plus any other income items. 3. Apply the fee schedule from Section 3. 4. Total income is NOT net income. Cost of goods sold is subtracted, but operating expenses are NOT. 5. If the LLC has income from both California and non-California sources, only California-source income is used for the fee (but see apportionment rules for multi-state LLCs).

5.4 -- $800 franchise tax treatment

• $800 franchise tax treatment rules — - The $800 franchise tax is NOT deductible against the LLC fee (they are separate obligations). - The $800 franchise tax IS deductible as a business expense on the owner's Schedule C (federal) and on the CA return. - The $800 is due on the 15th day of the 4th month of the taxable year (April 15 for calendar year). - If the LLC existed at any point during the year, the $800 is owed for that year (pro-ration is not available).

5.5 -- Cancellation / dissolution

• Cancellation / dissolution rules — - If the LLC was cancelled or dissolved during the year, Form 568 is still required for the short period. - The $800 franchise tax is still owed for the year of cancellation. - File the final Form 568, check the "final return" box, and include Form 3522 for the final year. - To avoid the $800 for the FOLLOWING year, cancel before the end of the current year.

Section 6 -- PROHIBITIONS

• P-568-1 — NEVER confuse the $800 franchise tax with the LLC fee. They are separate obligations under different R&TC sections (17941 and 17942). Both may be owed. (R&TC section 17941; R&TC section 17942)
• P-568-2 — NEVER compute the LLC fee using net income. The fee is based on TOTAL income (gross receipts less cost of goods sold, NOT less operating expenses).
• P-568-3 — NEVER skip Form 568 because the LLC had no income. If the LLC existed and was organized in CA or doing business in CA, Form 568 and the $800 franchise tax are owed regardless of income.
• P-568-4 — NEVER apply the temporary first-year $800 exemption to a 2025-formed or 2025-registered LLC. It expired for tax years beginning on or after January 1, 2024. Check the separate 15-day exception if the LLC was formed in the last 15 days of the year and conducted no business. (https://www.ftb.ca.gov/forms/2025/2025-568-booklet.html)
• P-568-5 — NEVER file Form 568 using the individual owner's SSN as the primary identifier. The LLC should have its own EIN. If it does not, obtain one before filing.
• P-568-6 — NEVER report the LLC fee payment as due on April 15. The estimated LLC fee is due on June 15 (Form 3536). Only the $800 franchise tax is due April 15 (Form 3522).
• P-568-7 — NEVER advise the taxpayer that dissolving the LLC mid-year eliminates the $800 for that year. The $800 is owed for any year the LLC existed, even for one day.
• P-568-8 — NEVER double-count the $800 franchise tax and LLC fee as a single payment. They are paid on different forms (3522 and 3536/568) at different times.

EC-568-1 -- New LLC formed in 2025, first-year exemption expired

Situation: Sole proprietor forms a California SMLLC on February 1, 2025. The first-year $800 exemption has expired (was for 2021-2023 only).

Resolution:

• The $800 franchise tax is owed for 2025. Due May 15, 2025 (the 15th day of the 4th month after the February 1 SOS filing date; Form 3522).
• If the LLC has total income exceeding $250,000, the LLC fee is also owed.
• Form 568 is due March 15, 2026.
• No extension applies for 2025-formed LLCs; do not apply the expired first-year exemption.

EC-568-2 -- LLC with high gross revenue but low net profit

Situation: SMLLC has $600,000 in gross receipts, $550,000 in operating expenses. Net profit is $50,000.

Resolution:

• Total income for LLC fee purposes = $600,000 (gross receipts, not net profit). If no COGS, total income = $600,000.
• LLC fee = $2,500 (income in $500K-$999K bracket).
• The $2,500 fee is owed despite the business earning only $50,000 in net profit.
• Plus $800 franchise tax.
• Total California entity-level cost: $3,300.
• Flag for reviewer: If the LLC has COGS, subtract COGS from gross receipts for the Schedule IW computation. Operating expenses are NOT subtracted.

EC-568-3 -- LLC cancelled mid-year

Situation: SMLLC cancels with the Secretary of State on June 30, 2025.

Resolution:

• File a final Form 568 for the short period January 1 -- June 30, 2025.
• $800 franchise tax is owed for 2025 (the year of cancellation).
• LLC fee is computed on total income for the short period.
• To avoid the $800 for 2026, the cancellation must be effective before December 31, 2025. In this case it is, so no 2026 $800 is owed.
• Check the "final return" box on Form 568.

EC-568-4 -- Out-of-state LLC doing business in California

Situation: Delaware-organized SMLLC has California customers generating $400,000 in California-source income. The LLC is not registered in California.

Resolution:

• The LLC is "doing business" in California under R&TC section 17946 (CA-source income exceeds the threshold).
• Must register with the CA Secretary of State (if not already), file Form 568, pay $800 franchise tax, and pay the LLC fee based on CA-source total income.
• LLC fee: $900 (income $250K-$499K range).
• Failure to register and file subjects the LLC to penalties and back taxes.
• Flag for reviewer: Out-of-state LLCs "doing business" in CA face the same obligations as CA-organized LLCs.

EC-568-5 -- Estimated fee underpayment

Situation: LLC estimated total income of $200,000 in June 2025 and did not file Form 3536 (no fee estimated since under $250K). Actual total income was $300,000.

Resolution:

• Actual LLC fee owed = $900 (income $250K-$499K).
• No Form 3536 was filed by June 15. The $900 is now due with Form 568 on March 15, 2026.
• Underpayment penalty: interest on $900 from June 15, 2025 to payment date.
• Flag for reviewer: Calculate interest at the FTB's quarterly rate.

EC-568-6 -- SMLLC with both W-2 payroll and Schedule C income

Situation: SMLLC pays the owner a salary (improperly -- disregarded entities typically do not pay W-2 to the owner for federal purposes). LLC also has Schedule C income.

Resolution:

• For federal purposes, a disregarded SMLLC owned by an individual cannot pay the owner a W-2 salary. This may indicate a classification error.
• For California Form 568, report all LLC income and deductions.
• The LLC fee is based on total income regardless of how compensation is structured.
• Flag for reviewer: Investigate whether the entity should be classified differently (e.g., S-corp election was intended).

EC-568-7 -- LLC fee threshold boundary

Situation: SMLLC has gross receipts of $249,500. After subtracting COGS of $0, total income is $249,500.

Resolution:

• Total income is below $250,000. LLC fee = $0.
• Only the $800 franchise tax is owed.
• If income had been $500 higher, the fee would jump to $900.
• Flag for reviewer: Verify total income computation. Income items that are easy to overlook (interest, other income) could push total income over the threshold.

EC-568-8 -- Late-formed LLC (December formation)

Situation: Sole proprietor forms a California SMLLC on December 1, 2025.

Resolution:

• $800 franchise tax is owed for 2025, even though the LLC existed for only one month.
• For a first-year domestic LLC, FTB Publication 3556 measures the annual-tax due date from the SOS filing date: the 15th day of the 4th month after formation. For a December 1, 2025 filing, pay by April 15, 2026.
• Form 568 is due for the short period December 1-31, 2025.
• $800 franchise tax is ALSO owed for 2026 (due April 15, 2026).
• Flag for reviewer: Two $800 payments due within months of each other. Advise client of the cost of late-year formation.

Test 568-1 -- Basic SMLLC, income under $250K

Input: California SMLLC, calendar year, total income $180,000. No first-year exemption. Expected: $800 franchise tax (Form 3522, due April 15, 2025). LLC fee = $0 (under $250K). Form 568 due March 15, 2026. Total CA entity-level cost: $800.

Test 568-2 -- SMLLC with LLC fee in $500K-$999K bracket

Input: California SMLLC, total income (gross receipts less COGS) = $750,000. No first-year exemption. Expected: $800 franchise tax. LLC fee = $2,500. Estimated fee of $2,500 due June 15, 2025 (Form 3536). Total CA entity-level cost: $3,300.

Test 568-3 -- High-income SMLLC

Input: California SMLLC, total income = $6,000,000. Expected: $800 franchise tax. LLC fee = $11,790. Estimated fee due June 15 (Form 3536). Total CA entity-level cost: $12,590.

Test 568-4 -- First-year LLC (exemption expired)

Input: New California SMLLC formed March 15, 2025. Total income = $100,000. First-year exemption expired after 2023. Expected: $800 franchise tax owed (no exemption). LLC fee = $0 (under $250K). Total: $800. Form 568 due March 15, 2026.

Test 568-5 -- LLC fee vs. net profit mismatch

Input: SMLLC with gross receipts $400,000, COGS $50,000, operating expenses $320,000. Net profit = $30,000. Expected: Total income for LLC fee = $400,000 - $50,000 = $350,000. LLC fee = $900 (income $250K-$499K). The $30,000 net profit is irrelevant for fee computation. Total entity-level: $800 + $900 = $1,700.

Test 568-6 -- Mid-year cancellation

Input: SMLLC cancels June 30, 2025. Total income for short period = $100,000. Expected: $800 franchise tax owed for 2025. LLC fee = $0 (under $250K). Final Form 568 for short period. No 2026 $800 owed (cancellation effective before Dec 31).

Test 568-7 -- Late filing penalty

Input: SMLLC files Form 568 four months late (July 15, 2026 instead of March 15, 2026). $800 paid on time. Expected: Late filing penalty: $18/month x 1 member x 4 months = $72. No late payment penalty (tax was paid on time).

Section 9 -- Self-checks

Check 220 -- Form 568 filed for every SMLLC. If the taxpayer operates through a California SMLLC, verify Form 568 is prepared.

Check 221 -- $800 franchise tax accounted for. Verify Form 3522 payment of $800 is documented. Verify due date (April 15, 2025 for TY2025).

Check 222 -- LLC fee computed from total income, not net income. Verify Schedule IW uses gross receipts less COGS, NOT net profit.

Check 223 -- LLC fee bracket is correct. Cross-check total income against fee schedule. Verify no income items were omitted (interest, other income).

Check 224 -- Form 3536 estimated fee filed if applicable. If total income was expected to exceed $250,000, verify Form 3536 was filed by June 15.

Check 225 -- First-year exemption not applied for 2025. If the LLC was formed or registered in 2025, verify the expired first-year exemption was not applied; separately check the 15-day exception for late-December no-business formations.

Check 226 -- $800 deducted on federal Schedule C. The $800 franchise tax is a deductible business expense. Verify it appears on the federal return.

Check 227 -- Late filing/payment penalties computed if applicable. If Form 568 or payments were late, compute penalties per Section 3.

Check 228 -- EIN used on Form 568. Verify the LLC files with its own EIN, not the owner's SSN.

Section 10 -- Cross-skill references

Inputs from:

• us-sole-prop-bookkeeping -- gross receipts, COGS, business income for Schedule IW
• us-schedule-c-and-se-computation -- Schedule C net profit (for context, not for fee computation)

Outputs to:

• ca-540-individual-return -- $800 and LLC fee as deductible expenses
• us-ca-return-assembly -- Form 568, Form 3522, Form 3536 for final package

Section 11 -- Known gaps

1. Multi-member LLC Form 568 is not supported (this skill is SMLLC only).
2. LLCs taxed as S-corps or C-corps use different forms (Form 100S, Form 100).
3. Multi-state apportionment for LLCs with income from multiple states is not fully detailed.
4. FTB interest rates for underpayment penalties change quarterly and must be looked up at filing time.

Change log

• v0.1 (April 2026): Stub.
• v0.2 (April 2026): Full content skill with $800 franchise tax, LLC fee schedule, Form 568 preparation, edge cases, and test suite.

End of skill

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