What you will actually pay

Default: disregarded

One owner, no election: the IRS treats the LLC as a disregarded entity. Profit and expenses go on Schedule C of your Form 1040. Self-employment tax is computed on Schedule SE. You issue yourself no W-2.

California follows the federal classification. You still file Form 568 (Limited Liability Company Return of Income) and pay the LLC tax/fee even though the income is already on your personal California return (Form 540, Schedule CA). Form 568 is an entity return, not a substitute for 540.

Multi-member LLCs default to partnership taxation (Form 1065 federally, still 568 in California). That is a different briefing. If you add a spouse as a member, talk to a CPA before you do it — community property and partnership status interact.

The $800

Every LLC organized in California, or doing business here, pays an annual tax of $800. Official source: FTB LLC page, last updated March 5, 2026.

• First payment: 15th day of the 4th month after you file with SOS. Form in June → due mid-September. Pay with FTB 3522 or Web Pay.
• Later years (calendar year): April 15, every year, until you cancel.
• You owe it at $0 revenue. You owe it if you forgot the LLC existed.
• The 2021–2023 first-year waiver (AB 85) is finished. LLCs formed in 2024, 2025, or 2026 pay year one.
• If you cancel with SOS within 12 months of organizing, FTB says the first-year $800 can be avoided. Do not form “just in case.”

Forming late in the year stacks two $800 payments in the following spring. The estimator on the briefing flags that.

Gross-receipts LLC fee

Separate from the $800. If California total income — a gross-receipts concept, not profit — is $250,000 or more, you also pay:

Estimate and pay with FTB 3536 by the 15th day of the 6th month (June 15 for a calendar-year LLC). Reconcile on Form 568. Underpaying the estimate can draw a penalty.

“Total income” is not “I netted $80k after AWS.” High billings with high contractor costs can still trip $250k. If you are near a cliff, accelerating or deferring invoices can be worth a CPA hour.

LLCs that elect to be taxed as corporations do not pay this fee. They pay corporation tax instead (for an S corp, 1.5% of net, minimum $800).

Federal income and self-employment tax

Disregarded LLC profit is self-employment income. 2026 rates:

• Social Security 12.4% on net earnings from self-employment, up to the $184,500 wage base.
• Medicare 2.9% on all net earnings (no cap).
• Additional Medicare 0.9% on earnings above $200,000 single / $250,000 married filing jointly.
• SE tax is computed on 92.35% of net profit. Half of SE tax is deductible for income tax.

Ordinary federal income tax then applies to taxable income at 2026 brackets. Software consulting is ordinary income, not capital gain, unless you sell the company.

California personal income tax

California taxes your LLC profit on Form 540. Marginal rates run from low single digits up to 12.3%, plus the 1.1% mental-health tax on taxable income over $1 million. There is no state self-employment tax, but there is also no state QBI deduction — California does not conform to IRC § 199A.

If you perform services from California, the income is California source even if the client sits in New York. If you move mid-year or work from another state, apportionment gets technical; do not guess.

S corporation election

An LLC may elect S corporation status with IRS Form 2553. California generally follows. You then:

• Pay yourself a reasonable W-2 salary.
• Run payroll: withholding, FICA (12.4% SS split employer/employee + 2.9% Medicare), FUTA, California PIT withholding, EDD unemployment and employment training tax.
• Take remaining profit as distributions, which are not subject to SE tax or FICA. That is the entire federal play.
• File Form 1120-S federally and Form 100S in California. Pay the greater of $800 or 1.5% of California S corp net income.
• Skip the LLC gross-receipts fee.

File 2553 by March 15 of the year you want the election, or within 75 days of formation for a new entity. Late elections are possible under relief procedures; do not assume.

Once you have a W-2, you are an employer. Read EDD payroll and workers’ compensation. Officer exemptions exist on paper and fail in practice more often than internet forums admit.

Pass-through entity elective tax

California lets qualifying partnerships and S corporations pay a 9.3% entity-level tax so owners can deduct state tax federally above the SALT cap. Official: FTB PTE page. Extended through taxable years beginning before 2031.

A disregarded single-member LLC cannot make the election. You need partnership or S corp tax status. The June 15 prepayment is the greater of $1,000 or 50% of last year’s PTE tax. From 2026, missing it no longer voids the election but haircuts each owner’s credit by 12.5% of their share of the shortfall.

This is a high-income planning tool, not a year-one move. If you are in the top California brackets, ask a CPA whether S corp + PTE beats disregarded + SE tax in your actual return, not a Twitter thread.

QBI (federal only)

IRC § 199A lets you deduct up to 20% of qualified business income on the federal return. California does not allow it. For 2026 the deduction is easier below about $201,750 taxable income single / $403,500 joint (thresholds are inflation-adjusted — verify annually).

Specified service trades or businesses (SSTBs), including consulting, lose QBI above the phaseout. Custom software development is often not an SSTB; “IT strategy consulting” often is. The line is advice versus delivering a program. Do not decide this from a blog. If you are near the threshold, classification is real money.

QBI does not reduce self-employment tax. An S corp salary also changes the QBI math (W-2 wages can help the wage limit above the threshold).

Quarterly estimates

The $800 is not your only prepayment. If you expect to owe $1,000+ of federal tax, pay 1040-ES quarterly (generally April 15, June 15, September 15, January 15). California has its own 540-ES. Underpayment penalties are how freelancers meet the FTB.

A workable habit: every time a client pays, move 30–40% of the net into a separate savings account titled to the LLC (or a tax reserve you do not touch). Adjust after the first year when you know your effective rate.

Annual California LLC calendar (calendar-year filer):

• April 15 — $800 (FTB 3522) and usually Form 568 / 540.
• June 15 — LLC fee estimate (3536) if you will clear $250k.
• June 15 — PTE first payment, if you are eligible and electing.
• Statement of Information — every two years, $20.

Sales tax is usually not yours

Custom software and professional programming services are generally not subject to California sales tax. Prewritten (“canned”) software, software on tangible media, and some SaaS-adjacent transfers can be. Details live on the selling code page with Regulation 1502.

Do not collect tax “just in case.” Do not ignore it if you start selling a downloadable product. Wrong collection is as painful as failing to collect.