Do I need to pay the $800 California FTB Fee for my LLC or Corporation?

Due to the fact that most LLCs and Corporations are “Pass-through” entities, it is mandatory for these business structures to pay a minimum of $800 per year to keep their organizations active. The Pass-through entities are inclusive of companies that do not need to pay any income tax, thus making the tax implications and regulatory requirements more straightforward.

However, the question here is whether to pay the $800 government fee or not. This decision, influenced by the benefits of an LLC in California, depends on your intention to continue your business or no longer use it. So, let’s dive right in and discuss what happens in different scenarios.

Do I need to pay the $800 California FTB fee if I plan to keep my business?

Absolutely yes. If you are planning on keeping your company active and in good standing, you need to pay the minimum franchise tax on a yearly basis. Failing to fulfill your California Franchise Tax obligations for two or more consecutive years will result in the suspension of your company. Moreover, if you neglect to pay the $800 fee for each year, you will incur penalties and interest charges, thus making the amount approximately $300 per year.

For instance, if you did not make the payment for the year 2022 and you are settling the fee in 2024, the $800 fee is likely to have increased to approximately $1,100 by 2024 due to the resulting penalties and interest fees.

Do I need to pay the $800 California FTB Fee if my business is closing or suspended?

First and foremost, this is not legal advice. For any such queries, it is advisable to connect with the FTB directly for more accurate answers. With that being said, it is the responsibility of the company and not the owners to pay $800 as California Franchise Tax. In other words, it’s the business’s obligation to pay this fee, and the owners are not personally liable for it, even if the company is suspended or closed.

Therefore, if the business cannot meet this financial obligation, the California Franchise Tax Board cannot pursue the owners personally for the payment. Instead, the company will be responsible for this outstanding amount indefinitely. However, if the company ceases to exist and has no plans for future business activities, this fee will remain associated with the company without further action.

What happens if I do not pay the $800 Franchise Tax Board Fee?

In any case, if you fail to pay the $800 FTB fee, your company will be suspended. Moreover, if you ever plan to reactivate the existing company, you need to retroactively pay for all those missing years of nonpayment to get the company back into working.

However, this rule only applies when dealing with the exact same company. In theory, you have the option to form a new LLC with a different name if you want to start your business afresh without being burdened by the previous company’s debts.

Helping with the $800 Franchise Tax Board Fee?

In essence, it is crucial for LLCs and Corporations to pay an $800 California FTB fee for the smooth functioning of their businesses. We at BusinessRocket provide our clients with expert guidance on tax-related situations. Our dedicated tax team is on standby to help you answer any specific questions. To schedule a meeting with our professional tax team, you need to fill out our entry form on our Tax Services Page, or you can directly call us at 888-700-8213 and press extension 3 to reach out to our tax department.

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