LLC in California for Non-Residents (2025 Guide): The $800 Trap?
Thinking of starting a California LLC? Be warned: The $800 minimum annual tax applies even if you make zero profit. We explain why most non-residents should avoid the Golden State.
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Author's Bio: The Foreign Founder Team specializes in US market entry for non-residents. We have seen too many entrepreneurs burn money on California taxes they didn't need to pay.
California is the home of Apple, Google, and Hollywood. It has a GDP larger than the United Kingdom.
Naturally, many non-resident entrepreneurs think: "If I want a successful US company, I should register in California."
Stop right there.
Unless you have a physical office in San Francisco or employees in Los Angeles, registering a California LLC is usually a expensive mistake.
Why? Because of the infamous $800 Minimum Franchise Tax.
In this guide, we will explain why California is a "Do Not Enter" zone for most remote entrepreneurs and when it actually makes sense to pay the premium.
Is California Right for You? (Decision Tree)
The $800 Elephant in the Room
California's tax structure is unique and aggressive.
1. The Minimum Franchise Tax
Every LLC registered in California (or "doing business" in California) must pay a minimum of $800 per year to the Franchise Tax Board (FTB).
- Does it matter if I make no money? No. You still pay $800.
- Does it matter if I lose money? No. You still pay $800.
- When is it due? By the 15th day of the 4th month after you file. (e.g., File in Jan -> Pay by April 15).
Note: There was a temporary waiver for the first year for LLCs formed between 2021-2023, but you should assume you will pay this eventually.
2. The Gross Receipts Fee
If your LLC is successful and makes over $250,000 in Gross Income (Total Revenue, not Profit) from California sources, you pay more on top of the $800.
| CA Gross Income | Additional Fee |
|---|---|
| $250,000 - $499,999 | $900 |
| $500,000 - $999,999 | $2,500 |
| $1,000,000 - $4,999,999 | $6,000 |
| $5,000,000+ | $11,790 |
Privacy: There is None
California prides itself on transparency.
- You must file a Statement of Information (Form LLC-12) every 2 years.
- This form lists the LLC's managers/members and their addresses.
- It is fully searchable online. Anyone can find your name and home address in seconds.
When MUST You Register in California?
You cannot simply choose Wyoming to avoid California taxes if you are actually operating in California.
California has strict rules on what constitutes "Doing Business":
- You have a physical office or store in CA.
- You have employees (W2) working in CA.
- The "25% Rule": If 25% of your property, payroll, or sales are in California.
If you are a non-resident living abroad and operating a purely digital business (SaaS, Dropshipping, Consulting), you generally DO NOT trigger these rules. You are free to choose a cheaper state like Wyoming or New Mexico.
California vs. The World
California vs. Delaware
- Delaware: Preferred by investors. $300 annual tax. High prestige.
- California: $800 minimum tax. High bureaucracy.
- Winner: Delaware (unless you are physically in CA).
California vs. Wyoming
- Wyoming: $60 annual fee. Anonymity. No income tax.
- California: $800 minimum tax. Public records. High income tax.
- Winner: Wyoming (by a landslide for non-residents).
Summary
If you are a non-resident entrepreneur living outside the US:
- DO NOT form a California LLC just because "it sounds cool."
- DO NOT form a California LLC just because you use a California bank (SVB, Mercury). You can have a Wyoming LLC and bank in California.
Only form a California LLC if you are physically moving there or opening a physical branch.
For everyone else, keep that $800 in your pocket and go with Wyoming or New Mexico.
Fact Checked & Verified
This article was reviewed by our editorial team for accuracy. Strategies regarding LLC formation and credit building are based on current 2025 regulations.