California cuts the first-year LLC tax to $400 for 2027 through 2029
For first taxable years beginning in 2027 through 2029, SB 122 halves the annual tax for new LLCs, limited partnerships, and limited liability partnerships.
Reviewed by Laurence S. Bezinover · Published
What changed
California's annual tax on most LLCs, limited partnerships, and limited liability partnerships is $800, and before SB 122 the full amount applied starting with the first year. The temporary first-year exemption under AB 85 covered only tax years 2021 through 2023.
SB 122 (Stats. 2026, ch. 23) sets the first-year tax at $400 for these entities when their first taxable year begins on or after January 1, 2027, and before January 1, 2030. From the second year on, the full $800 applies. Corporations are unaffected; a new corporation was already exempt from the minimum franchise tax in its first taxable year (Rev. & Tax. Code § 23153).
Who it affects
Founders choosing an entity and a formation date.
Questions to raise with counsel
- When does our first taxable year begin, and does that make us eligible for the $400 amount or the full $800?
- Will our total California income reach $250,000, triggering the separate LLC fee (Rev. & Tax. Code § 17942)?
- Which of SB 122's other tax changes affect us, and how should we review them with our accountant before year-end planning?
This briefing is general information about California law, not legal advice for your situation. Reading it does not create an attorney-client relationship.