California · 2026 briefing

Opening a California LLC to sell your software engineering.

You are not required to form an LLC to freelance. Forming one in this state is cheap to file and expensive to keep. The LLC does not change how your profit is taxed unless you later elect S corporation status. It can wall off some lawsuit risk if you actually treat it as a company.

This is a practical briefing compiled from California SOS, FTB, CDTFA, IRS, and SSA publications as of August 2026. It is not legal, tax, or insurance advice. Filing fees and tax rules change. Confirm figures on the official sites before you pay or elect anything, and consult a California CPA or business attorney.

$70: to exist; Articles of Organization, Form LLC-1, Secretary of State. Online at bizfile.
$800: every year; Minimum franchise tax to the FTB, even at $0 revenue. First-year waiver ended after 2023.
$20: then biennial; Statement of Information within 90 days, then every two years. Miss it: $250 penalty.

TL;DR:

If you live and work in California and you bill companies for custom software — staff-aug, product engineering, architecture, code review — a California single-member LLC taxed as a disregarded entity is the usual first entity. You file online, get an EIN, open a bank account, write an operating agreement, and send clients a W-9 in the LLC’s name.

Do not form in Delaware, Wyoming, or Nevada because a blog said it is cheaper. If you live here, California still wants the $800 and a foreign-LLC registration on top of the other state’s fees.

Software engineering is not a California licensed profession. You do not need a professional LLC, a contractor’s license, or a CSBPE. You likely do not collect sales tax on custom development. You still need a city business tax in most places you work from, contracts that assign IP correctly, and insurance if anyone enterprise-shaped is going to sign.

Stay a sole proprietor (Schedule C under your SSN) only if revenue is small, you have little personal wealth to protect, and no client is asking for an entity. Once you are billing mid five figures or you own a house, then consider climbing the liability wall.

Run the numbers

Entity cost is not income tax. This estimates SOS fees, the $800, the gross-receipts LLC fee, and — if you toggle it — California S corp tax plus federal payroll tax versus self-employment tax.

What California will charge you

Rough entity-level cost for a California-resident solo engineer billing clients. Income tax on the profit still sits on your 1040 and 540 either way.

Expected California-source receipts$180,000

Gross receipts the FTB uses for the LLC fee — generally your California-source billings, not profit.

Deductible expenses15% · $27,000

Formation month (2026)

Registered agent

Model an S corporation electionPays a reasonable W-2 salary; leftover profit as distributions. California then charges 1.5% of S corp net income (minimum $800) instead of the LLC gross-receipts fee.

Year-one entity cost

$890

SOS filings + California entity tax ($800 + LLC fee if any)

Articles + first Statement of Information$90

Annual LLC tax (FTB 3522)$800

LLC fee (under $250k)$0

Each later year (approx.)$810

First $800 dueApril 15

Payroll / SE tax (federal)

Net profit modeled$153,000

Self-employment tax (15.3% on 92.35%)$21,618

Self-employment tax is the 12.4% Social Security + 2.9% Medicare levy on net earnings. Half is deductible on the 1040. An LLC taxed as a disregarded entity does not reduce this.

Read the rest in order

File it yourself

You do not need LegalZoom, Incfile, or a registered-agent mill to form a California LLC. The state built bizfile Online for this. A formation mill charges $300–$800 to type the same form and then upsells annual “compliance.” Pay the state $70, write your own operating agreement (or have a lawyer review a draft), and put the rest toward a CPA conversation about S corps once you are consistently clearing roughly $80k–$100k of profit.

Next: whether you should form at all, then the filing sequence.