How California LLC Taxes Work — Step 8 of 8
By default, your LLC's profits pass through to your personal tax return — there's no separate LLC income tax. You'll owe federal income tax, self-employment tax, and California's income tax (which runs as high as 13.3%). Here's the full picture, an estimator to see your real number, and when an S-corp election starts to make sense.
A California LLC is taxed as a pass-through by default — profits flow to your personal return, so there's no separate LLC income tax. You pay federal income tax, 15.3% self-employment tax, and California income tax (1%–13.3%). This is on top of the $800 franchise tax. Earning a strong profit? An S-corp election can cut self-employment tax.
- Default tax
- Pass-through
- Self-employment
- 15.3%
- CA income tax
- 1%–13.3%
- State return
- Form 568
- S-corp election
- Form 2553
- Plus
- $800 franchise
- You're at
- Final step ✓
How a California LLC Is Taxed
By default, the IRS and California treat your LLC as a pass-through entity. The LLC itself doesn't pay federal income tax; instead, the profit "passes through" to the owners, who report it on their personal returns. A single-member LLC is taxed like a sole proprietorship; a multi-member LLC is taxed like a partnership.
On that pass-through profit, you'll face three layers:
- Federal income tax — at your personal bracket (10% to 37%).
- Self-employment tax — 15.3% (Social Security + Medicare) on your active business earnings.
- California income tax — 1% to 13.3%, the highest top rate in the country.
All of this is separate from the $800 franchise tax and any LLC fee, which you owe regardless of profit. Your California LLC reports its income on Form 568.
Federal + California Tax Estimator
Enter your LLC's expected annual net profit and your filing status for a rough estimate of self-employment tax, federal income tax, and California income tax:
Rough estimate for 2025 tax-year figures (filed 2026): includes the ~15.3% SE tax (with the half-SE income deduction and a simplified 20% QBI deduction federally), 2025 federal and California brackets, and standard deductions ($16,100 single / $32,200 MFJ federal; $5,706 / $11,412 California). The 1% surtax over $1M taxable income is included. Excludes the $800 franchise tax + LLC fee (Step 7), credits, other income, and deductions. Not tax advice — confirm with a CPA.
When an S-Corp Election Saves You Money
Here's the lever high-earning California LLCs pull: electing S-corporation tax status. It doesn't change your LLC legally — it changes how you're taxed. Instead of paying 15.3% self-employment tax on all your profit, you pay yourself a reasonable salary (subject to payroll tax) and take the rest as distributions that avoid self-employment tax.
- It pays off above roughly $70,000–$90,000 in profit, where the SE-tax savings outweigh the added payroll and accounting costs.
- You file Form 2553 with the IRS to elect S-corp status (not Form 8832 — that's for C-corp).
- California taxes S-corps a 1.5% franchise tax on net income (minimum $800), so factor that in — the federal SE savings still usually win for solid profits.
- You'll run payroll and file an 1120-S, so budget for a bookkeeper or payroll service.
Form 2553 vs Form 8832 — don't mix them upTo be taxed as an S-corp, file Form 2553. Form 8832 elects C-corp taxation, which is rarely what a small LLC wants (it brings double taxation). For most owners, the S-corp election via 2553 is the money-saving move once profit is high enough.
That's all 8 steps — your California LLC is complete!
You've gone from naming your LLC to understanding its taxes. You now know the full path: name, agent, Articles, operating agreement, Statement of Information, EIN, franchise tax, and taxes. The last decision is who actually files it all for you.
- ✓Forms your California LLC with service terms shown at checkout
- ✓Free registered agent service the first year
- ✓Free operating agreement template + EIN help
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California LLC Taxes — FAQ
Enjoys-life Team is the founder and CEO of Enjoys-life. The tax guidance here — pass-through treatment, the 15.3% self-employment tax, California's 1%–13.3% income tax and Form 568, and the S-corp election via Form 2553 — reflects current IRS and California Franchise Tax Board rules for the 2025 tax year. This is educational information, not tax advice; consult a CPA for your situation.
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