How To Avoid Back-To-Back California Annual Franchise Tax (Updated: Apr. 2026)

Your LLC needs to file an Annual Franchise Tax payment to stay compliant.

However, forming your LLC at the wrong time can require you to make two Annual Franchise Tax payments in quick succession (One for the current tax year and another for the next).

So, below, I’ve discussed how to avoid this back-to-back payment. You’ll learn when to file with the Secretary of State and how to file your formation correctly.

Why Do Back-To-Back Franchise Tax Payments Occur?

To help you comprehend why some LLCs make back-to-back $800 Annual Franchise Tax payments, you need to understand when each payment is due and how they can merge.

• Your first $800 Annual Franchise Tax payment is due on the 15th day of the 4th month AFTER your LLC is officially approved by the California Secretary of State. This requirement is stated under California Revenue & Taxation Code §17941.
• Your second $800 Annual Franchise Tax payment is due on April 15th (If your LLC is following a calendar tax schedule).

Example: Your LLC is approved on December 10, 2025.

• December 2025 is Month 1.
• March 2026 is Month 4.
• Your first Annual Franchise Tax payment is due by March 15, 2026, covering the 2025 tax year.
• Your second Annual Franchise Tax payment is due by April 15, 2026, covering the 2026 tax year.

Although your LLC has been active for only a few months, you are still required to pay $1,600.

Avoiding The $1,600 Franchise Tax

Now that you’ve learned how the back-to-back Franchise tax payments can happen, I’ll show you how to avoid them.

The best way is to avoid forming your California LLC near the end of the year, specifically, in October, November, or December.

You can use a Future File Date when filing your Articles of Organization with the California Secretary of State to form your LLC in January of the following year. This approach works if you plan to start your LLC late in the calendar year and don’t need it to be immediately active.

Example: You set your future filing date to January 1, 2026.

• Your LLC will officially go into existence in January, which now effectively turns into Month 1.
• Your first $800 Annual Franchise Tax payment isn’t due until April 15, 2026.
• Your second $800 Annual Tax payment isn’t due until April 15, 2027.
• This means that you’re only required to make the April payment, completely avoiding the January payment in the back-to-back example above.

1. Using A Future File Date For Your California LLC

In California, the “LLC Effective Date” is commonly referred to as the “Future File Date.” Both terms mean the same thing and can be used interchangeably.

California only allows LLC formation applications (Articles of Organization) to be filed online as of 2025. Therefore, you can only select your Future Filing Date using the online application method.

When filing your California Articles of Organization, you should reach a section called “Purpose, Management Structure, and File Date.”

1. Navigate to the “File Date” section (Located under the “Management Structure” section).
2. Check the “Future File Date” box.
3. Set your Future File Date to January 1 of the following year.

This only works if you’re not in a rush to start your LLC. While you’ll be starting operations at a later date, you’ll avoid paying the back-to-back $800 Annual Franchise Tax fees.

2. Using California’s 15-Day Rule

California’s 15-day rule is designed to help LLCs avoid paying the $800 Annual Franchise Tax in their first short first operating year. This is set under the Revenue & Taxation Code (§17946).

Under this rule, your LLC is not considered active for the first taxable year if it goes into existence during the last 15 days of December. In this case, you don’t own the first $800 Annual Franchise Tax payment for your first short operating year.

Your LLC must be approved on or after December 17 to qualify for this exemption. The 15-day rule does not apply if your LLC is approved on or before December 16. You’ll be charged the back-to-back $800 Annual Franchise Tax payments as described above.

Conclusion

If you want to form an LLC in California near the end of the year but don’t need it to be immediately active, you should use January 1 of the following year as your effective formation date. This ensures that you don’t have to pay two $800 Annual Franchise Tax payments back-to-back.

Alternatively, you can wait until January to file your Articles of Organization with the California Secretary of State. Either method will help you avoid paying two Annual Franchise Tax payments in quick succession.

Frequently Asked Questions