California Waives First Year Franchise Board $800 Minimum Fee for LLCs, LPs and LLPs

California Assembly Bill 85 was enacted to make numerous changes to the California Revenue and Taxation Code. One of those changes eliminated the annual $800 minimum tax for Limited Liability Companies (LLCs), Limited Liability Partnerships (LLPs), and Limited Partnerships (LPs), that were formed with the California Secretary of State on or after January 1, 2021 but before January 1, 2024, for their first taxable year.

California law generally imposes a minimum franchise tax of $800 on every corporation incorporated in or doing business in California as a foreign entity. A corporation that incorporates or qualifies to do business in California is exempt from paying the minimum franchise tax in its first taxable year.

Business entities such as LLCs, LLPs, and LPs are subject to an $800 annual tax. However, before the passage of AB 85, these entities were not able to receive the same benefit of that tax exemption for an entity’s first taxable year. With AB 85 now in effect, the California Revenue and Taxation Code has been amended to extend the first-year exemption to LLCs, LLPs, and LPs that organize, register, or file with the Secretary of State “on or after January 1, 2021, and before January 1, 2024.”