If you've formed a single-member LLC (SMLLC), you might be surprised to learn that, even though the IRS treats it as a “disregarded entity” for federal tax purposes, California still requires you to file a separate state return and pay an annual $800 minimum franchise tax. This requirement applies even if your LLC has no income or business activity. 
      At the federal level, the income from an SMLLC “passes through” directly to the sole member's personal tax return (Form 1040). This simplifies things, no separate federal return for the LLC. But California takes a different approach. According to the Franchise Tax Board (FTB), any LLC “doing business” in California must file Form 568 and pay the $800 fee annually.

      What does “doing business” mean? In California, this includes actively operating in the state, having employees or sales in California, or even just having a physical presence or agent here. That means if your LLC is engaging in any business activity in California, it must be registered with the Secretary of State and pay the required fees, regardless of how it's treated for federal taxes. 
      But what if your SMLLC isn't actively running a business? Some LLCs are set up purely to hold investments, such as real estate or stocks, and don't conduct day-to-day operations. In such cases, if the LLC has no business activity in California, it may not need to register or pay the $800 annual tax, but only if it isn't considered to be “doing business” here. 
      Many owners of passive investment-holding LLCs choose to form them in states like Delaware or Wyoming, which don't impose the same annual fee for LLCs with no business activity. However, the moment the LLC starts doing anything that counts as business in California, the FTB rules kick in, no matter where the LLC was originally formed.
      Essentially, just because the IRS lets you skip a separate tax return for your SMLLC doesn't mean California will. Accordingly, if your LLC touches California in any way, both paperwork and a $800 fee is to be expected. https://www.ftb.ca.gov/file/business/types/limited-liability-company/single-member-llc.html