You also need to file a California Form 568 tax return with the Franchise Tax Board and pay the $800 annual tax whether or not you have any income, or you get a big fine that increases every month you don't file...
In my state (not California) I have to file paperwork with the state on a yearly basis to confirm the status of my corporation: still active, any changes to the board, etc. There is a fee associated with this as well, though it's far less than $800. If you fail to do this, they just dissolve your corporation.
California is the same, the Statements of Information must be filed annually with the Secretary of State and subject to a filing fee (separate from the franchise fee).
Because governments are monopolies, they can charge monopolistic prices. The only way to not work with them is to physically move your permanent residence. That's a pretty deep moat.
And the worst offenders will take potshots at you on your way out. NY, CA and other states specifically try and extract extra tax revenue from people who said "screw it, I'm out" but didn't do a good enough job documenting how out they in fact were.
>I'm curious what the reasoning behind having a fee that large is.
The fee is just one small part of a litany of compliance hurdles. The purpose is to keep the small guy under the table so that he can be squashed like a bug (by a lawsuit and/or the gov itself) if he F's up.
I'm sure they have some grandiose "think of the children"-esque language they do to justify it but as someone who lives in a similar regulatory environment the practical effect is that businesses either start with lots of investment[1] or they stay as under the table as they can possibly be.[2]
[1] either capital investment, like a facility and fleet of trucks, or time investment in the status quo, for example by a white collar professional (like a PE, lawyer or accountant) spending years working under some other business and building a reputation before striking out on their own or a tradesmen getting a professional license that requires years in a field. Sometimes there's a hybrid approach where you do your 9-5 for someone who's already made the investment and do side gigs to build up a customer base and then at some point you "go legit" and start your own business.
[2] And they either stay small or try and slowly amass the capital to start an above the table business.
Yea similar story. Had a partner and thought we would do a startup. Wanted to be all official so formed a LLC in CA. At the end of the year we had no revenue, and just some source code we had been plugging away at for the year. So our biggest two expenses were: $800 “standard fuck you” tax from California and about $400 to a CPA to write “$0” on a bunch of federal and state tax forms. After a couple of years of that we decided what we were working on was an expensive hobby rather than a startup and dissolved.
In other words, both of you were idiots. Sitting on your butt and programming is not a business. It doesn't make sense to form a company unless you are actually running a business.
FYI -- You and your partner could have formed a general partnership, gotten a separate TIN from the FTB and IRS, and registered a ficticous business name with the county. When the company is ready to sell software, you can transition from a GP to an LLC. Your CPA should have told you this; get a better one next time.
Ask me how I know :)