LLC for Rental Property in California: The Honest Cost Guide (2026)

California is the opposite of Texas for rental property LLCs. The asset protection is real, but the state attaches an $800 annual franchise tax to every LLC — first year included — plus a gross-receipts fee on top once rents get large. That changes the math. For a lot of California landlords the LLC still makes sense; for some it costs more than it protects. This guide walks the actual setup, the real numbers, and how to figure out which side you’re on.

Key takeaways

→ California LLC formation costs $70 to file the Articles of Organization (Form LLC-1) with the Secretary of State, plus a $20 Statement of Information (Form LLC-12) due within 90 days and then every two years.
→ The big one: every California LLC owes an $800 minimum annual franchise tax to the Franchise Tax Board — even in its first year. The AB 85 first-year exemption expired at the end of 2023 and was not renewed, so LLCs formed in 2024, 2025, or 2026 pay the full $800 from year one.
→ Above $250,000 in total California income, an additional gross-receipts LLC fee stacks on top of the $800 — $900 at $250K, $2,500 at $500K, $6,000 at $1M, and $11,790 at $5M+. Most single-property landlords stay under $250K and pay only the $800.
→ Out-of-state LLCs don't escape this. If your LLC owns California rental property, California treats it as doing business here — you must register as a foreign LLC and still owe the $800 (and the gross-receipts fee if you cross the thresholds). Forming in Wyoming or Nevada does not avoid the California tax.
→ Honest take: the $800 floor means a California rental LLC needs to protect enough equity to justify the cost. For a high-equity property or a portfolio it's worth it. For a low-equity single rental, good landlord insurance plus an umbrella policy is often the better-value move.

Why California is different from no-tax states

Three state-level factors make California a more expensive — and more deliberate — decision than states like Texas or Florida:

1. The $800 minimum franchise tax. Every LLC organized in California or doing business in California owes a minimum annual tax of $800 to the Franchise Tax Board (FTB), regardless of income or activity. This is the single most important number for a California landlord to internalize. It is not a one-time fee — it recurs every year for the life of the LLC, until you formally cancel it.

2. The first-year exemption is gone. From 2021 through 2023, Assembly Bill 85 waived the $800 tax for an LLC’s first year. That exemption expired on December 31, 2023 and was not extended. Plain English: if you form a California LLC in 2026, you owe the $800 in your first taxable year, due by the 15th day of the 4th month after formation. (Verify current status with the CA FTB — exemptions like this have come and gone before.)

3. The gross-receipts LLC fee. On top of the $800, California charges an additional fee once an LLC’s total California income crosses $250,000. This is a tiered fee, not a percentage, and it matters mostly for multi-property portfolios or high-rent buildings — most single-rental landlords never reach it. Details below.

None of this kills the case for a California rental LLC. It just means you do the math before you file, instead of after.

California LLC costs — the real numbers

Here is what a California rental LLC actually costs to set up and keep running. These are state figures that change periodically — confirm current amounts with the CA Secretary of State and FTB before you file.

Item	Amount	When	Web-verified
Articles of Organization (Form LLC-1)	$70	One-time, at formation	Yes
Statement of Information (Form LLC-12)	$20	Within 90 days of formation, then every 2 years	Yes
Minimum annual franchise tax	$800	Every year, first year included	Yes
Gross-receipts LLC fee	$0–$11,790	Annual, only if CA income ≥ $250,000	Yes
Registered agent (optional service)	~$39–150/year	Annual, if you use a service	Yes
EIN from the IRS	Free	One-time	Yes

For most landlords with a single California rental under $250,000 in income, the real recurring number is $800/year (plus the registered agent if you use one, plus $20 every two years for the Statement of Information). That $800 floor is the figure to weigh against what the LLC is protecting.

The $800 franchise tax — what you actually owe

The minimum franchise tax is $800 per year, paid to the FTB using Form 3522 (LLC Tax Voucher). Key points:

It applies in year one. No first-year exemption since AB 85 expired at the end of 2023.
Due date in the first year: the 15th day of the 4th month after you form the LLC. Form in June 2026, the first $800 is due by mid-September 2026.
Ongoing due date: April 15 each year for calendar-year LLCs.
It’s owed even with no income. A California LLC that owns one vacant rental and collects $0 still owes the $800. The tax is tied to the entity existing, not to profit.
It stops only when you cancel. Dissolving the LLC with the Secretary of State and FTB is the only way to end the obligation.

This is the number that separates California from no-income-tax states. In Texas a small rental LLC pays roughly $0 in ongoing state cost. In California it’s $800 every year, guaranteed.

The gross-receipts fee — when rents get large

Above $250,000 in total California income, California adds a separate LLC fee on top of the $800. It’s a flat amount per income tier, paid using Form 3536 (Estimated Fee for LLCs):

Total California income	Additional LLC fee	Total annual state cost ($800 + fee)
Under $250,000	$0	$800
$250,000 – $499,999	$900	$1,700
$500,000 – $999,999	$2,500	$3,300
$1,000,000 – $4,999,999	$6,000	$6,800
$5,000,000 or more	$11,790	$12,590

(These tiers are web-verified for 2025–2026; confirm current figures with the FTB before relying on them.)

Two things to understand about this fee:

It’s based on total income, not profit. California measures gross receipts — total rents collected — not net rental income after expenses. A property grossing $300,000 in rent that nets very little still triggers the $900 fee.

Most single-rental landlords never hit it. A house renting for $3,500/month grosses $42,000 a year — nowhere near $250,000. The gross-receipts fee is a portfolio and multi-unit concern, not a single-door concern. But if you put several properties under one LLC, the rents combine, and a portfolio can cross $250,000 faster than you’d expect.

This is one reason California investors often weigh one-LLC-per-property against a single holding LLC — separate LLCs each get the under-$250K $0 fee tier, but each also owes its own $800. The math is portfolio-specific.

Step-by-step: forming a California rental LLC

Step 1: Pick the LLC name

California requires the name to:

Include “LLC”, “L.L.C.”, “Limited Liability Company”, or a permitted variant
Be distinguishable from other registered California entities
Avoid restricted terms (“bank”, “trust”, “insurance”) without authorization

Check availability via the California Secretary of State’s bizfileOnline business search before you file.

Naming tips specific to rental LLCs:

Don’t put the property address in the name (forces re-formation if you sell)
Don’t use your personal name (weakens the privacy and disclosure picture)
Generic + slightly distinctive works: “Bayview Holdings LLC”, “1420 Real Estate Ventures LLC”

Step 2: Appoint a registered agent (agent for service of process)

California requires every LLC to name an agent for service of process with a physical California street address (not a PO Box) who accepts legal documents during business hours.

Options:

Self — you can act as your own agent if you have a California address. Free, but your address becomes public record (lawsuits get served wherever you list).
Commercial registered agent service — ~$39–150/year. Northwest Registered Agent ($39/year), ZenBusiness, LegalZoom, and others provide a California address plus privacy.

For most landlords the commercial agent is worth the ~$39/year for privacy alone. See our Northwest Registered Agent review for the operator pick.

Step 3: File the Articles of Organization (Form LLC-1)

Form LLC-1 creates the California LLC. As of 2026, California requires this to be filed online through the Secretary of State’s bizfileOnline portal — paper filing of Form LLC-1 by mail has been discontinued.

Filing fee: $70
Turnaround: online filings are typically processed within several business days; expedited options exist for an additional fee
Required fields: entity name, business address, agent for service of process, management structure (member-managed vs manager-managed), organizer signature

Step 4: File the Statement of Information (Form LLC-12)

This is a California-specific step that trips up new filers. Within 90 days of formation, you must file an initial Statement of Information (Form LLC-12), and then every two years after that.

Fee: $20 each filing
Filed online through bizfileOnline
Missing the 90-day deadline triggers FTB penalties, so calendar it the day you form

Step 5: Get an EIN from the IRS

After California approves your LLC, apply for an Employer Identification Number (EIN):

Free at irs.gov/businesses
Online for US-resident applicants — issued immediately
By mail (Form SS-4) for non-US applicants — 4–6 week turnaround

You’ll need the EIN to open a business bank account, file taxes, and identify the LLC on legal documents.

Step 6: Draft and sign an operating agreement

California does require an LLC to have an operating agreement (it can be oral or written under the statute, but you should always put it in writing). For a rental LLC, a written agreement is non-negotiable:

It overrides California’s default LLC rules, which are often not what landlords want
It’s an asset-protection signal — lack of formalities is a piercing-the-corporate-veil factor (see Piercing the corporate veil for landlords)
Most banks require it to open business banking

Operating agreement should cover:

Member ownership percentages
Management structure (member-managed vs manager-managed)
Capital contributions
Profit and loss distribution
Decision-making and voting
Transfer restrictions
Dissolution procedures

For most single-member rental LLCs, a 5–10 page operating agreement is enough. Multi-member LLCs are worth custom drafting by an attorney at $500–1,500.

Step 7: Pay the $800 and register with the FTB

This is the California step that has no Texas equivalent. Your LLC must:

Pay the $800 minimum franchise tax via Form 3522 by the 15th day of the 4th month after formation
File Form 568 (LLC Return of Income) annually with the FTB
Pay the gross-receipts LLC fee via Form 3536 if total California income is projected to hit $250,000 or more

Build the $800 into your year-one budget. It is not optional and there is no first-year waiver.

Step 8: Open a business bank account

Critical for the LLC veil to hold. Required documents:

California-stamped Articles of Organization
EIN confirmation letter from the IRS
Operating agreement
Photo ID for all authorized signers

Online business banking (Bluevine, Mercury, Relay) and most major banks (Chase, Bank of America, Wells Fargo) all open California LLC accounts. Keep every dollar of rent and every expense flowing through this account — commingling is the fastest way to weaken the veil.

Step 9: Transfer property into the LLC

This is where most landlords miss steps. See How to transfer property to an LLC for the full sequence. California-specific notes:

Documentary transfer tax: California counties charge a documentary transfer tax on deed transfers. Some transfers to a wholly owned LLC qualify for an exemption (no change in beneficial ownership), but this is fact-specific — confirm with the county recorder.
Property tax reassessment: California’s Proposition 13 caps assessment increases, and a transfer can trigger reassessment to current market value — a potentially large tax hit. Transfers to an LLC with identical proportional ownership often qualify for an exclusion, but get this checked before you record. This is the single most expensive mistake a California landlord can make on transfer.
Deed recording: record the deed with the county recorder where the property sits.
Due-on-sale clause: California mortgages contain enforceable due-on-sale clauses. Get lender clearance in writing before deeding property to the LLC.

Out-of-state LLC for a California rental? It doesn’t dodge the $800

A common move investors try: form a Wyoming or Nevada LLC (no state income tax, strong privacy) and use it to hold a California rental. Plain English: it does not work the way people hope.

California treats owning California real estate as doing business in California. If your out-of-state LLC’s California property and tangible assets exceed roughly $71,000 (a figure the FTB indexes), the LLC is deemed to be doing business here. That means:

You must register as a foreign LLC with the California Secretary of State ($70)
File the Statement of Information ($20, then biennially)
File Form 568 and pay the $800 minimum franchise tax every year
Pay the gross-receipts fee if you cross the income thresholds

So a Wyoming LLC holding a California rental still owes California $800 a year — and now you’re paying Wyoming’s annual fees on top. Forming out of state to escape the California tax is a myth. The state where the property sits controls. If your rental is in California, the California tax follows it.

There are legitimate reasons to use a Wyoming holding company structure (privacy, a parent entity over multiple state LLCs), but “avoiding the $800” is not one of them.

Should you form a California LLC for your rental? The math

Because of the $800 floor, the California decision is more numerical than in no-tax states. Here’s how to figure out which side you’re on:

Form the LLC if the equity at risk justifies the cost. $800/year is cheap insurance against a six-figure lawsuit if your property holds significant equity. A $600,000 rental with $300,000 of equity is worth protecting behind an LLC. The $800 is a rounding error against what a tenant-injury judgment could reach.

Lean toward insurance-only if equity is thin and the property is single. A heavily mortgaged single rental with little equity exposes less, and good landlord insurance plus an umbrella policy may protect you for less than $800/year while avoiding the franchise tax and the transfer-tax/reassessment risk entirely. The LLC isn’t free here, so it has to earn its keep.

For a portfolio, the LLC almost always wins — but plan the structure. Separate LLCs each owe $800 but isolate liability cleanly and keep each entity under the $250K gross-receipts threshold. One holding LLC owes a single $800 but combines rents (faster to the gross-receipts fee) and pools liability across properties. See Should you put rental property in an LLC? for the framework.

Form the California LLC when

+ The property holds meaningful equity worth protecting
+ You own (or are building) a multi-property California portfolio
+ You're comfortable with the $800/year floor as the cost of doing it right
+ You're planning a long-term hold that justifies the setup and transfer work
+ You want clean liability separation between properties and your personal assets

Skip it (insurance instead) when

− Single, heavily mortgaged rental with little equity at risk
− Short-term hold where $800/year plus transfer costs outweigh the protection
− You'd trigger a costly Prop 13 reassessment on transfer (check first)
− You won't maintain formalities (a sloppy LLC won't hold — buy insurance instead)
− Property is in another state (form the LLC where the property sits)

Operating discipline for California rental LLCs

The LLC veil holds when you maintain formalities. The piercing factors apply the same in California as nationwide, and California courts examine them closely:

Separate bank account — non-negotiable. Commingling is the most-cited piercing factor.
Written operating agreement — defeats the “no formalities” argument.
LLC-named property and contracts — deed, leases, and vendor contracts all in the LLC’s name, not yours personally.
Adequate landlord insurance — the LLC is a backstop, not a substitute. Carry a landlord policy and ideally an umbrella.
File Form 568 and pay the $800 every year — lapsing the franchise tax can lead to FTB suspension of the LLC, which strips its legal protections.

A suspended California LLC can’t defend a lawsuit or enforce contracts until it’s revived and back-taxes are paid. The $800 isn’t just a cost — it’s what keeps the protection switched on.

FAQ

Frequently asked questions

How much does it cost to form an LLC for rental property in California? +

The Articles of Organization (Form LLC-1) cost $70 one-time, filed online with the Secretary of State. You also file a Statement of Information (Form LLC-12) for $20 within 90 days and every two years after. The recurring cost that matters most is the $800 minimum annual franchise tax to the FTB, owed every year including the first. Optional registered agent service runs ~$39-150/year.

Does a California LLC really owe $800 in its first year? +

Yes, as of 2026. The first-year exemption under AB 85 applied only to LLCs formed between 2021 and 2023, and it expired at the end of 2023. It was not renewed. An LLC formed in 2024, 2025, or 2026 owes the full $800 in its first year, due by the 15th day of the 4th month after formation. Verify current status with the CA FTB, since exemptions like this have come and gone before.

What is the California LLC gross-receipts fee? +

On top of the $800 franchise tax, California charges an additional LLC fee once total California income reaches $250,000. The tiers are $900 ($250K-$499,999), $2,500 ($500K-$999,999), $6,000 ($1M-$4,999,999), and $11,790 ($5M+). It's based on total income (gross rents), not profit. Most single-rental landlords stay under $250,000 and pay only the $800. Confirm current figures with the FTB.

Can I form an LLC in Wyoming or Nevada to avoid California's $800 tax on my rental? +

No. California treats owning California real estate as doing business in California. Your out-of-state LLC must register as a foreign LLC, file Form 568, and still pay the $800 minimum franchise tax every year, plus the gross-receipts fee if you cross the thresholds. You'd also owe the other state's fees on top. The state where the property sits controls, so forming elsewhere does not avoid the California tax.

Should I form an LLC for my California rental, or just buy insurance? +

It comes down to equity at risk versus the $800/year cost. For a property with meaningful equity or a multi-property portfolio, the LLC is worth it. For a single, heavily mortgaged rental with little equity, strong landlord insurance plus an umbrella policy can protect you for less than $800/year while avoiding the franchise tax and the transfer-tax and Prop 13 reassessment risks. Run the numbers on your specific property.

Will transferring my California rental into an LLC trigger a property tax reassessment? +

It can. Under Proposition 13, a change in ownership can reassess the property to current market value, which can be a large tax increase. Transfers to an LLC with the same proportional ownership often qualify for an exclusion, but this is fact-specific and the rules are strict. Confirm with the county assessor or a California tax professional before recording the deed. Getting this wrong is the most expensive California transfer mistake.

Does a California rental LLC need a registered agent? +

Yes. California requires every LLC to name an agent for service of process with a physical California street address (not a PO Box) who accepts legal documents during business hours. You can be your own agent if you have a California address, but most landlords use a commercial service ($39-150/year) for privacy, since the agent's address becomes public record.

How is rental income from a California LLC taxed? +

Federally, a single-member LLC's rental income flows through to Schedule E on your 1040; a multi-member LLC files Form 1065 and issues K-1s. At the state level, the LLC files Form 568 with the FTB and the income flows to your California return, since California does have a state income tax. The LLC itself also owes the $800 minimum franchise tax and, above $250,000 in income, the gross-receipts fee. Confirm specifics with a California CPA.

What happens if I don't pay the $800 California franchise tax? +

Unpaid franchise tax accrues penalties and interest, and the FTB can suspend the LLC. A suspended California LLC loses the right to do business, defend lawsuits, or enforce its contracts until it's revived and the back taxes are paid. Suspension effectively switches off the liability protection you formed the LLC to get, so the $800 is what keeps that protection active.

Bottom line

California is a real-asset-protection state with a real recurring cost. The setup is straightforward — $70 to file the Articles of Organization, $20 for the Statement of Information within 90 days, an EIN, a written operating agreement, a business bank account, and a careful property transfer — but the $800 annual franchise tax is the figure that drives the decision.

For high-equity properties and portfolios, the LLC is worth the $800 floor and then some. For a thin-equity single rental, run the numbers honestly: good landlord insurance plus an umbrella may protect you for less, without the franchise tax or the Prop 13 reassessment risk. And forget about forming out of state to dodge the $800 — if the property is in California, the California tax follows it.

If you’ve decided the LLC is right and want a service that handles California filings cleanly, Northwest Registered Agent is the operator pick. For the full state-agnostic walkthrough, start with how to start an LLC for rental property and the LLC for rental property pillar guide. Comparing your structure to a no-tax state? See our Texas rental LLC guide for the contrast. Picking a formation service is covered in best LLC service for real estate investors.

This article is general information and does not constitute legal or tax advice. California LLC rules, franchise tax amounts, gross-receipts fee tiers, and filing fees change periodically — these are state figures that should be confirmed with the California Secretary of State and the Franchise Tax Board (FTB) before you form or file. For your specific situation, consult a CPA or attorney. Last updated: 2026-05-28.