When Is California Franchise Tax Due for All Entity Types?

The California Franchise Tax is an annual levy imposed on various business entities for the privilege of operating within the state. This tax applies to corporations, limited liability companies (LLCs), limited partnerships (LPs), and limited liability partnerships (LLPs) that are registered or conduct business in California. It is a mandatory fee, separate from income tax, and is required regardless of a business’s profitability or activity level. Understanding the specific due dates for this tax helps businesses maintain compliance and avoid penalties.

Understanding Annual Due Dates

For established businesses in California, annual franchise tax due dates align with the close of their taxable year. The minimum annual franchise tax for most entities, including corporations and LLCs, is $800. This minimum tax is due even if the entity has no income or is inactive.

Corporations, including C-Corporations and S-Corporations, generally have their tax return and payment due on the 15th day of the fourth month following the close of their taxable year. For calendar year filers, this usually means an April 15th deadline for C-corporations. S-Corporations, however, typically have a March 15th due date for their returns and payments.

Limited Liability Companies (LLCs) have specific annual tax obligations. The $800 annual LLC tax is due by the 15th day of the fourth month after the beginning of their taxable year, often April 15th for calendar year LLCs. LLCs with total California income exceeding $250,000 are subject to an annual LLC fee. This fee must be estimated and paid by the 15th day of the sixth month of the current taxable year, and its amount is based on a tiered gross income schedule.

Partnerships, encompassing General Partnerships, Limited Partnerships, and Limited Liability Partnerships, also have specific annual due dates. For most partnerships, the return is due on the 15th day of the third month following the close of their taxable year, which is typically March 15th for calendar year filers. Limited Partnerships and Limited Liability Partnerships are also subject to the $800 annual tax, with its due date aligning with their return.

Initial Due Dates for New Entities

New businesses formed or registered in California have initial due dates for their franchise tax obligations that differ from established entities. Corporations, both C and S, benefit from a first-year exemption from the minimum franchise tax. They are not required to pay the $800 minimum tax in their initial year but are still liable for any tax based on net income.

Unlike corporations, the first-year exemption did not apply to non-corporate entities such as LLCs, LPs, and LLPs. For LLCs and other entities, the initial minimum franchise tax payment of $800 is due by the 15th day of the fourth month after filing their articles of organization or incorporation with the California Secretary of State. For instance, if an LLC is formed in May, its initial franchise tax payment is due by August 15th.

The first annual return for a new entity is due on the same schedule as established businesses, based on the close of their first tax year. While some new entities may be exempt from the initial minimum tax payment, they still need to file a return and potentially pay income-based tax or the annual LLC fee if applicable. The obligation to pay the minimum tax resumes in the entity’s second taxable year.

Extensions and Payment Considerations

California offers automatic extensions for filing most business tax returns. These extensions pertain only to the filing deadline, not the payment deadline. The full amount of tax owed is due by the original due date to avoid penalties and interest.

For corporations, an automatic seven-month extension is generally granted for filing, moving the deadline for calendar year filers from April 15th to November 15th. S-corporations and partnerships receive a six-month or seven-month extension, respectively, typically extending their March 15th filing deadline to September 15th or October 15th.

Businesses expecting a tax liability exceeding the minimum franchise tax, particularly corporations and LLCs with higher gross incomes, are generally required to make estimated tax payments throughout the year. These payments are typically due in quarterly installments: April 15th, June 15th, September 15th, and January 15th of the following year.

Several methods are available for making franchise tax payments, including online options and mail. Online payments are generally processed immediately, while mailed payments must be postmarked by the due date to be considered timely. Failure to pay taxes or file returns by the respective due dates can result in penalties and interest charges. Penalties for late filing can be 5% of the tax due for each month or part of a month the return is late, up to a maximum of 25%. Late payment penalties also apply, typically being 5% of the unpaid tax plus an additional 0.5% for each month the payment is late, up to 25%.