Yes, your California business must pay $800 to the California Franchise Tax Board or FTB every year.
Too many clients have related to me myths about why their California business entities do not have to pay the minimum tax. Some believe that they do not have to pay the tax when their corporations or LLCs do not make any money. Some believe that tech start-ups do not have to pay.
These myths are false, and they can get you in a great deal of trouble. If you do not pay the tax, the FTB will add penalties and late fees, in addition to the annual $800 fee. And the Secretary of State will not allow you to close a business until you have paid all taxes owed to the FTB. I have seen instances where businesses opened for years owed tens of thousands to the FTB. Even learning how much your business owes can be a huge hassle of you fall behind in payments.
There are a couple minor exemptions from the tax – including a one-year exemption for businesses that started during the COVID crisis. In general, however, you should error on the side of assuming you must pay the tax. And the tax may be due sooner than you think – check the FTB website to be sure!