California LLC for Non-Residents: When You Actually Need California, the $800 Annual Tax, and When Wyoming Is the Better Choice

California is the largest state economy in the USA, home to Silicon Valley, Hollywood and major container ports. Founders abroad in technology, consumer goods or media often think of it first.

Most of the time, though, a non-resident running a business from abroad should not form a California LLC. California charges every LLC an $800 annual tax whether it earns anything or not, adds an income-based fee once California receipts grow, requires its own state return every year and publishes managers' names. None of that buys a remote business anything a Wyoming or New Mexico LLC does not already provide.

The exception is real and important: if your company will genuinely do business in California, with staff, an office, inventory or an owner living there, California's rules apply whether you form there or not. In that case, forming in California is often cheaper than forming elsewhere and registering in California on top.

This guide explains how California decides who is doing business there, what it costs, how the $800 tax works now that the first-year exemption has ended, registering an out-of-state LLC, and what to do with a California LLC you already own.

Short answer: form in California only if the business will actually operate there: California employees, an office, stock in a California warehouse, property, an owner living in California, or California sales above the state's doing-business threshold. Every California LLC, and every out-of-state LLC doing business there, pays an $800 annual tax from its first year (the temporary first-year exemption covered only 2021 to 2023), plus an LLC fee of $900 to $11,790 once California income reaches $250,000. Formation with UCB is $249; keeping it active is $963 a year. For a business run from abroad with no California presence, Wyoming is usually the better choice.

When a foreign-owned company is "doing business in California"

California's Franchise Tax Board treats a company as doing business in California if any of the following applies:

• It is organized (formed) in California, or commercially domiciled there, meaning it is managed from California.
• It engages in any transaction for financial gain within California.
• Its California sales, California property or California payroll exceed set thresholds, which are adjusted each year.

For 2025, the most recent year the Board has published, the thresholds were:

Two further rules matter for LLC owners:

• An LLC is doing business in California if a member is doing business there on its behalf. If you, the owner, move to California and run the company from there, the company is doing business in California, wherever it was formed.
• The thresholds are not a safe harbour. California's tax appeals body has confirmed that a company below the numbers can still be doing business in California if it carries out transactions for profit in the state, for example through California staff, an office or stock held there.

What this means in practice

Typical situations for a non-resident:

If any "yes" applies, the company owes California's $800 annual tax every year and must register with California if it was formed elsewhere. If none applies, there is usually no reason to involve California at all.

Who a California LLC suits, and who it does not

California suits:

• Founders moving to California, on a visa or otherwise, who will run the company from there. Visa questions need an immigration lawyer; forming a company does not give a right to live or work in the USA.
• Companies hiring in California, such as a sales team in the Bay Area or a production crew in Los Angeles.
• Importers and e-commerce brands holding stock in a California warehouse near the ports of Los Angeles, Long Beach or Oakland.
• Film, media and entertainment businesses with production, offices or staff in California.
• Property investors buying in California, whose LLC will be doing business there through the property. See US real estate through an LLC.

California does not suit:

• Freelancers, consultants and agencies working for California clients from abroad. Clients in San Francisco pay a Wyoming LLC as easily as a California one.
• SaaS, apps and digital products with California customers but no California staff or office.
• Marketplace sellers whose stock is spread across Amazon's or Walmart's network.
• Founders choosing California for prestige. Investors care about whether a startup is a Delaware corporation, not whether it is a California LLC.

Unsure where you fall? Try the state selector, and see the best state for non-residents for the full comparison.

What a California LLC costs

California's filing fee to form an LLC is low, $70, and is included in our formation price. The cost of California comes afterwards:

The $800 annual tax is a state tax, not a formation fee. It is paid to the Franchise Tax Board, not with the formation filing, and the first payment falls due about three and a half months after the company is formed. We tell you the exact date when we form your company. The first payment is not part of the formation price: you pay it to California yourself, or we pay it on your behalf with 10% added for processing. After that, the yearly tax is included when you keep the company active with us.

The federal side is the same as in every state: a foreign-owned single-member LLC files Form 5472 with a pro forma 1120 every year, and a multi-member LLC files a partnership return. Our US tax filing service is $300. For the full picture across states, see what a US LLC costs every year or put your own numbers into the US company cost calculator.

The $800 annual tax, explained

Every LLC that is formed in California, registered with California, or doing business in California pays the $800 annual tax, every year, even if it has no income and does no business, until it is formally cancelled.

The first year

• The first payment is due by the 15th day of the 4th month after the company is formed or registered. An LLC formed on June 18 pays by September 15.
• After that, the tax is due by the 15th day of the 4th month of each tax year; for a calendar-year company, April 15.
• The first-year exemption has ended. For tax years beginning in 2021, 2022 and 2023 only, new LLCs did not pay the $800 in their first year. That temporary rule did not continue, so an LLC formed today pays from the start. Many older articles still describe the exemption as current.
• Forming late in the year means two payments close together. A calendar-year LLC formed in October pays $800 for its short first year, then another $800 by April 15 for the new year.
• There is one narrow exception: an LLC whose first tax year is 15 days or less, and which does no business in California during those days, owes neither the tax nor a return for that short year.

The LLC fee on top

Once an LLC's total income from California sources reaches $250,000 in a year, it also owes an LLC fee, based on that California income:

The fee is based on income, not profit: a loss-making company with $600,000 of California income still pays $2,500, estimated in advance.

Federal treatment does not change it

A single-member LLC disregarded for federal tax still pays the $800, files Form 568 and, where it applies, pays the LLC fee. We do not prepare California returns, but we will refer you to a California accountant.

California corporations are different

A California corporation pays a minimum franchise tax of $800 a year, or tax on its California income at California's corporate rate if that is higher. New corporations are not subject to the minimum tax in their first taxable year; that long-standing first-year rule applies to corporations, not to LLCs. See the 21% corporate tax explained.

Already formed elsewhere? Registering an out-of-state LLC in California

Many non-residents already own a Wyoming, Delaware or New Mexico LLC and then start doing business in California, by hiring there, renting a warehouse or moving there. California then requires the company to register as a foreign LLC before it transacts business in the state.

Registration means:

• an application to register, with a $70 state fee,
• a California agent for service of process,
• a statement of information within 90 days, then every two years ($20),
• the $800 annual tax every year, plus the LLC fee once California income reaches $250,000,
• a California Form 568 every year,
• and everything the home state still requires, such as Wyoming's annual report or Delaware's $400 tax.

The $800 tax applies once the company is doing business in California whether or not it registers. An unregistered company also cannot bring a lawsuit in California courts until it registers and pays what it owes, and California can add penalties for the period it operated without registering.

This is why the location question should be answered before you form. A Wyoming LLC that registers in California pays both states' charges and keeps two agents. If you know the company will operate in California, a California LLC from the start is usually simpler and cheaper.

If your California activity is limited, such as a short project or a single contractor, the answer is less clear. Ask us before you register.

Other California taxes and obligations

Income tax

California taxes income from California sources. A non-resident member of an LLC with California-source income may need a California personal return, and the LLC may have to withhold on payments to non-resident members. These are matters for a California accountant; we do not prepare state or personal returns.

Sales tax

California's statewide base sales tax rate is 7.25%, plus local district taxes in many areas. A business with a physical presence in California, such as a shop, warehouse or staff, must hold a seller's permit and collect tax. A remote seller with no California presence must register once its sales of goods into California exceed $500,000 in the current or preceding calendar year. Marketplaces generally collect tax on sales made through them. Sales tax registration and returns are not part of our services; ask us and we will point you in the right direction. See state taxes for foreign-owned LLCs.

Employees and contractors

Hiring in California brings California payroll registration, state income tax withholding, state disability insurance and some of the country's strictest rules on who counts as an employee rather than a contractor. Payroll is not a service we provide; a US payroll provider handles it. See hiring in the USA as a non-resident company.

Privacy: what California's record shows

California's public statement of information lists the principal office and the names and addresses of the managers, or of the members if there are none. For a single-member LLC, that usually means the owner. The address can be a business address; our US business address add-on ($60 a year) provides one.

Wyoming and New Mexico do not require members or managers on the formation document.

California compared with Wyoming, New Mexico and Delaware

If the business does business in California, the real comparison is not California against Wyoming, but California alone against Wyoming plus California registration, and California alone usually wins. If the business does not do business in California, Wyoming or New Mexico costs a fraction as much every year.

What about startups raising money in Silicon Valley?

Venture investors, including California ones, expect a Delaware corporation, which registers in California if it has staff there. A California LLC is rarely the right vehicle for a venture-backed startup. See US C-Corporation for non-residents and raising investment as a foreign founder.

Banking and payment platforms

California LLCs are accepted by US banks and payment platforms like any other; approval depends on the business, the owner and consistent documents.

The California-specific risk is suspension. If a California LLC does not pay its annual tax or file its returns, the Franchise Tax Board can suspend it, and a suspended company loses its rights and powers in California until it is revived. A bank or platform that checks the state record will see the suspension. Paying the $800 on time each year prevents this.

See US business bank accounts for non-residents, Stripe for non-residents and why banks reject non-resident applications.

If you already own a California LLC

You use it, and the business is in California

Keep it current: the $800 annual tax each year, the LLC fee if it applies, Form 568, the statement of information every two years, a registered agent, and the federal return. When you keep the company active with us, we renew the agent, pay the annual tax for you and file the statement of information on time, and our US tax filing service covers the federal return.

You formed it in California but the business is not there

A common situation: a non-resident formed a California LLC through a platform, perhaps believing the first-year exemption still applied, and now pays $800 a year for a company with no California connection. California will keep charging the tax until the LLC is formally cancelled. Leaving it unused does not stop it.

The usual answer is to move the business to a company in a cheaper state, then cancel the California LLC with its final California return. Our company closure service ($249) handles the cancellation and the federal side; the final California return is prepared by a California accountant we can refer you to. If the California company's bank accounts, contracts or history are valuable, ask us first and we will look at the options with you.

The company is suspended or behind

If years of $800 tax are unpaid, penalties and interest have been added and the company may be suspended. A suspended company must file the missing returns and pay what is owed before it can be revived, and it cannot be cancelled cleanly until its tax position is settled. Federal filings are often missing as well, and Form 5472 penalties start at $25,000 per return. Contact us early: we will review the state and federal position, tell you what is owed in principle, and bring in a California tax specialist for the state side. See missed US tax filings: what to do.

A California LLC's yearly calendar

Worked examples

These are illustrative examples, not client cases.

Example 1: the remote developer with California clients. A developer in Pune works for three San Francisco start-ups, entirely from India, with revenue far below California's sales threshold. The company is not doing business in California. Recommendation: Wyoming or New Mexico; a California LLC would add $800 a year and a state return for nothing.

Example 2: the founder who is moving. A product designer in Dubai plans to move to Los Angeles, with immigration advice arranged separately, and to run her design company from there. Once she manages it from California, the company is doing business in California. Recommendation: a California LLC if she is forming now, or, if she already has a Wyoming LLC, compare registering it in California with forming a California LLC and closing the Wyoming one, before she moves.

Example 3: the Long Beach warehouse. A home-textiles exporter in Karachi plans to hold stock with a fulfilment provider in Long Beach and sell to US retailers. Stock in California means doing business there. Recommendation: California LLC, with a seller's permit and California tax advice arranged locally, and the $800 tax and LLC fee built into the budget.

Example 4: the unused California LLC. A Bangladeshi founder formed a California LLC in 2024 through an online platform, assuming the first year was free, never traded and has paid nothing. Three years of $800 tax, for 2024, 2025 and 2026, are now owed with penalties and interest, and no federal return has been filed. Recommendation: settle the California position with a California tax specialist, file the missing federal returns, and cancel the company properly, forming in Wyoming or New Mexico if a US company is still needed.

Common mistakes with California LLCs

1. Forming in California for prestige when the business is run from abroad.
2. Relying on the first-year exemption, which ended after tax years beginning in 2023.
3. Forming late in the year and paying $800 twice within a few months.
4. Leaving an unused California LLC open, thinking the tax stops when the business does.
5. Forming in Wyoming while operating in California, or moving there with an out-of-state LLC, then paying for two states.
6. Ignoring the LLC fee, which is based on income, not profit.

How UCB helps

We form California LLCs and corporations for non-residents remotely: state filing fee, first-year registered agent and EIN included, so a California LLC is $249 all-in, and we tell you the date the first $800 annual tax falls due; you pay it directly, or we pay it for you with 10% added for processing. We can add a US business bank account application, an ITIN ($249), a US business address or a virtual office. Each year, for $963, we keep the company active, renewing the registered agent, paying the annual tax for you and filing the statement of information on time, and with our US tax filing service we prepare and file the federal return. For Form 568, sales tax and payroll, we will refer you to California specialists. Most importantly, if your business does not need California, we will tell you before you form, and recommend a state free of charge. See California company formation.

Wondering whether your business really needs California, or holding a California LLC you no longer use? WhatsApp us at +91 8105 199 399 or email enquiries@ucbsolutions.com and we will tell you honestly whether California applies to you and what it will cost each year.