United States

Company Formation in California

State of California — Secretary of State & Franchise Tax Board

Formation Time

3–5 business days

Min. Capital

No minimum

Corporate Tax

8.84% state (or $800 minimum franchise tax); 21% federal (C-Corp)

Foreign Ownership

100%

Overview

California is the world's fifth-largest economy with a GDP exceeding USD 4 trillion — larger than the United Kingdom, India, or France. It is the unrivalled global epicentre of technology, venture capital, entertainment, and innovation, home to Silicon Valley, Hollywood, the San Francisco Bay Area, and the Los Angeles tech corridor. Virtually every major technology company in the world was either founded in or maintains a significant presence in California: Apple, Google, Meta, Netflix, Tesla, Salesforce, OpenAI, Stripe, and thousands more. California imposes an 8.84% state corporate tax rate and a minimum annual franchise tax of $800 for all LLCs and corporations — even if they earn no income — which makes it one of the more expensive US states for entity maintenance. The state's personal income tax peaks at 13.3%, the highest in the nation. However, the unparalleled access to venture capital (California-based firms invest more than all other US states combined), the deepest talent pool in technology and engineering, the strongest startup ecosystem, and the prestige of a California incorporation make it the only sensible choice for companies that are building in or selling to the California market. The California Franchise Tax Board (FTB) is notably aggressive in its enforcement, applying the 'doing business in California' standard broadly — any company that derives income from California sources or has a factor of sales, property, or payroll in the state may be subject to California taxation regardless of where it is incorporated.

World's 5th largest economy

Silicon Valley — global tech capital

Unrivalled VC access

Home to Apple, Google, Meta, OpenAI

39 million consumer market

World-class universities & talent

Why Choose California

World's 5th largest economy — GDP exceeding USD 4 trillion

Home to Silicon Valley, the global capital of technology and venture capital

Unrivalled access to VC funding — California firms invest more than all other US states combined

Deepest talent pool in tech, engineering, AI, biotech, and entertainment

Home to Apple, Google, Meta, Tesla, OpenAI, Stripe, Netflix, and thousands more

Massive domestic market — 39 million consumers (larger than Canada's population)

World-class universities — Stanford, Caltech, Berkeley, UCLA

Global brand prestige of a San Francisco or Los Angeles business address

Business Entity Types

Entity	Ownership	Directors	Capital	Tax	Best For
LLC	100%	N/A (member-managed or manager-managed)	None	$800 minimum annual franchise tax + 1.5% LLC fee on gross revenue over $250K; pass-through for federal	Small businesses, consulting, freelancing, real estate
C-Corporation	100%	1 (for corps with 1 shareholder); 2 (for 2 shareholders); 3 (for 3+ shareholders)	None	8.84% state CIT (or $800 minimum franchise tax) + 21% federal CIT	VC-funded startups, tech companies, companies issuing stock options to employees
S-Corporation	US persons only	1	None	1.5% state tax on net income (minimum $800 franchise tax) + pass-through to shareholders	Established US-owned small businesses seeking pass-through plus corporate structure
Foreign Qualification	100%	Per home state rules	None additional	$800 minimum franchise tax applies; 8.84% CIT on California-sourced income (if C-Corp)	Delaware C-Corps with California operations — very common for VC-backed startups

Step-by-Step Formation Process

Name Search

Same day

Search the California Secretary of State business database. California does not allow name reservations, so filing should happen promptly after confirming availability.

File Formation Documents

3–5 business days (standard); 1 day (expedited)

File Articles of Organization (LLC — $70 fee) or Articles of Incorporation (Corp — $100 fee) with the California Secretary of State. Standard processing is 3–5 business days; expedited options available.

Statement of Information

Within 90 days

File the initial Statement of Information (Form LLC-12 or SI-550) within 90 days of formation. This is a public filing that lists the names and addresses of managers/officers.

EIN & Bank Account

1 day (EIN for US persons) to 4 weeks (non-US)

Obtain an EIN from the IRS and open a business bank account. California has every major US bank plus a thriving digital banking ecosystem.

FTB Registration

Automatic upon formation

Register with the California Franchise Tax Board (FTB) for the annual franchise tax ($800 minimum). File Form 568 (LLC) or Form 100 (Corp) annually.

Costs & Fees

Government / License Fee	USD 70+
Our Service Fee	USD 1,000 – 3,000
Annual Renewal	USD 800+

Fees are indicative and may vary based on business activity, entity type, and additional approvals required. Contact us for a precise custom quote.

Get Custom Quote

Banking

California has the most comprehensive banking ecosystem in the United States. Silicon Valley Bank (now under First Citizens), JPMorgan Chase, Bank of America, and Wells Fargo all have major California operations. For startups, Mercury and Brex have become the default banking partners, both headquartered in the Bay Area.

Account Opening Time

1 day (Mercury/Brex) to 3 weeks (traditional)

Multi-Currency

Yes — multiple currencies supported

Recommended Banks

MercuryBrexChaseBank of AmericaWells FargoFirst Republic (now JPMorgan)Silicon Valley Bank (First Citizens)Wise Business

Tax Overview

Corporate Tax

8.84% state CIT for C-Corps (or $800 minimum franchise tax if higher); 21% federal CIT; LLCs pay $800 minimum franchise tax + LLC fee based on gross revenue

Personal Income Tax

1–13.3% state income tax (highest marginal rate in the US — applies to California residents or California-sourced income)

VAT / Sales Tax

7.25% base state sales tax (total effective rate 8.5–10.25% with local surcharges — applies to tangible goods)

Capital Gains Tax

Taxed as ordinary income at state level (up to 13.3% for individuals); federal rates apply separately

Withholding Tax

7% California withholding on payments to non-residents for California-sourced services (Form 592); 30% federal for non-US persons

Double Tax Treaties

68 countries

The $800 minimum franchise tax applies to every LLC and corporation regardless of revenue. It is due on the 15th day of the 4th month after formation, then annually by April 15. New LLCs are exempt from the $800 in their first year (but not subsequent years). The LLC fee is: $0 (under $250K revenue), $900 ($250K–$500K), $2,500 ($500K–$1M), $6,000 ($1M–$5M), and $11,790 ($5M+).

Frequently Asked Questions

Why is California more expensive than other US states?

California imposes an $800 minimum annual franchise tax on every LLC and corporation regardless of revenue, plus an LLC fee based on gross revenue (up to $11,790 for companies earning $5M+). The 8.84% state CIT and 13.3% top personal income tax rate are the highest in the US. However, no other state offers comparable access to venture capital, talent, and the tech ecosystem.

Should I incorporate in Delaware and register in California?

This is the standard approach for VC-backed startups: incorporate a C-Corp in Delaware (for Court of Chancery and established corporate law) and register as a foreign corporation in California (where you operate). You will pay both Delaware franchise tax and California's $800 minimum + 8.84% CIT on California-sourced income. This dual structure is expected by most institutional VCs.

Do I have to pay the $800 franchise tax even with no income?

Yes. The $800 minimum applies regardless of whether the company earns any income. The only exception is the first-year exemption for new LLCs (not corporations) formed on or after January 1, 2021. If the company is dissolved, the final $800 payment must still be made for the year of dissolution.

What triggers 'doing business in California'?

The California Franchise Tax Board defines 'doing business' broadly: having sales in California exceeding $735,000, having property in California exceeding $73,500, having payroll in California exceeding $73,500, or being organised in California. If any of these thresholds are met, the entity owes the $800 franchise tax and may owe CIT. Remote sales into California can trigger these rules.

Can non-US residents form a California LLC?

Yes. Any nationality can form a California LLC. However, California requires more disclosure than Wyoming — the Statement of Information lists managers and officers publicly. The $800 annual franchise tax also applies from day one (except first-year LLC exemption). For non-US residents with no California nexus, Wyoming or Delaware may be more cost-effective.

What is the LLC fee based on gross revenue?

In addition to the $800 franchise tax, California LLCs pay a fee based on total worldwide gross revenue: $0 (under $250K), $900 ($250K–$500K), $2,500 ($500K–$1M), $6,000 ($1M–$5M), and $11,790 ($5M+). This is calculated on gross revenue, not net profit, making it particularly impactful for low-margin businesses.