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Is there a way to reduce the CA franchise tax if my business is not operating or generating sales/income?

Palo Alto, CA |

Can I reduce the CA franchise tax or receive some kind of tax credit if my business isn't earning any income (and not even operating yet). I'm planning on registering as an LLC but if I don't sell anything, monetize, or generate any sales, is there a way to circumvent this tax? There will be expenses involved.

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Attorney answers 3


It cannot be reduced below the minimum annual franchise tax of $800.

The above is general legal and business analysis. It is not "legal advise" but analysis, and different lawyers may analyse this matter differently, especially if there are additional facts not reflected in the question. I am not your attorney until retained by a written retainer agreement signed by both of us. I am only licensed in California. See also terms and conditions item 9, incorporated as if it was reprinted here.


The state is providing service: allowing the creation of an entity that limits the liability for its owners. That is what the $800 is for. That's a good buy, considering that that sum has not changed in more than 20 years (and possibly, much more). 510-208-5500. This answer does not create an attorney-client relationship. It is not legal advice, because it is only of a general nature. Please contact a lawyer qualified in your jurisdiction to discuss your situation in confidence, using your factual details. Avvo answers are only general legal responses. Item 9 of's Terms and Conditions are incorporated in this disclaimer as though it were printed here.


If you choose to form an LLC you cannot avoid the minimum $800. If $800 is a crippling expense you may consider a sole proprietorship to avoid that tax, but you would lose any limited liability otherwise available under an appropriate business entity. You need to analyze any risks associated with your business an potential liability exposure. You may want to meet with a lawyer to be properly advised.

DISCLAIMER & IRS Circular 230 DISCLOSURE: The information in this answer is for general information purposes only. Nothing on this communication should be taken as legal advice for any case or situation. Nothing herein is intended as legal advice. You should not rely upon any information as a source of legal advice, and your receipt or viewing of any such information does not create an attorney-client relationship between you and James E. Pratt. IRS Circular 230 Disclosure: To comply with requirements imposed by the IRS, we inform you that any U. S. federal tax advice contained herein (including any attachments), unless specifically stated otherwise, is not intended or written to be used, and cannot be used, for the purposes of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter herein.



do i need to register to be a sole proprietorship or is that a given?