I've been recently told by an accounting professional, as well as by an owner of multiple businesses here in California, that a new company formed in California doesn't actually have to pay the Franchise Tax Fee for its first year.

Is this accurate?

And in either case, is there any official source that clarifies this matter unequivocally?

1 Answer 1


I am not a tax professional, but the following is a copy/paste from a California Form 1060 publication that indicates that Franchise Tax is due the first year, but the minimum ($800 from the linked document) does not apply.

To compute the tax for your corporation’s first tax year, multiply your California net income by the appropriate tax rate . Your first tax year is not subject to the minimum franchise tax . After the first year, your tax is the larger of your California net income multiplied by the appropriate tax rate or the minimum franchise tax .

  • Thanks for this. Do you have any idea if this document refers to all non-individual business entities, including LLCs, or literally only corporations, i.e. S-corps and C-corps? Jan 31, 2017 at 2:47
  • You're going to need someone with more familiarity with California regulation than I have.
    – zeta-band
    Jan 31, 2017 at 19:07

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