Every LLC that is doing business or organized in California must pay an annual tax of $800 . This yearly tax will be due, even if you are not conducting business, until you cancel your LLC . You have until the 15th day of the 4th month from the date you file with the SOS to pay your first – year annual tax .
Due to the multitude of tax disadvantages that burden the California LLC , it is a very expensive means to operate a business. It is therefore typically in the owners best interest to form a corporation, rather than a LLC , unless the entity is being formed to hold real estate.
How to Form an LLC in California Choose a Name for Your California LLC . File Articles of Organization with the Secretary of State. Choose a Registered Agent. Decide on Member vs. Manager Management. Prepare an Operating Agreement. File Biennial Report. Pay Your California State Tax Obligations. Comply With Other Tax and Regulatory Requirements.
The best way to avoid paying back-to-back $800 franchise tax is to not let your California LLC go into existence at the end of the year.
When you do not pay your minimum LLC tax of $800 the FTB will charge you a penalty. Eventually, if you do not pay the tax your LLC will be suspended. The FTB will continue to charge you the $800 fee until the LLC is dissolved.
The California Franchise Tax Board imposes a penalty if you do not pay the total amount due shown on your tax return by the original due date. The penalty is 5 percent of the unpaid tax (underpayment), plus 0.5 percent of the unpaid tax for each month or part of a month it remains unpaid (monthly).
Three easy options: If you’re solo, and low liability, go the sole proprietor route to avoid the $800 CA biz tax . If you’re not solo, or really need the LLC personal liability protection, register your LLC in Wyoming. Is your liability low, but not so low that you want to risk being ‘naked’ in litigious California ?
If you are one of the many Californians wishing to avoid California income tax , there are two basic rules that you have to keep in mind. The first is that a resident pays California tax on their worldwide income. For instance, you are a resident of California and you own part of an LLC outside of the state.
State Business Tax By default, LLCs themselves do not pay federal income tax , only their members do. California imposes an $800 annual minimum franchise tax on typical LLCs (those not electing to be taxed as corporations). The tax and fee are payable to the California Franchise Tax Board (FTB).
You should form your limited liability company ( LLC ) before getting an employer ID number ( EIN ). This is because you’ll be asked for the date of business formation and for the business’s legal name when you request your EIN .
You can go to your State’s Secretary of State office, (Most states have this online) and search for your LLC , if you can’t find it, it may not be registered. The EIN is applied for through the IRS. You can do this through email or fax.
The state will approve your California LLC in 3-5 business days. Also, if you form your LLC during peak filing season (December through January), approval can take up to 6-7 business days. You can form your California LLC online or by mail.
What’s the LLC Annual Fee? The LLC annual fee is an ongoing fee paid to the state to keep your LLC in compliance and in good standing. It’s usually paid every 1 or 2 years, depending on the state. This fee is required , regardless of your LLC’s income or activity.
Every corporation that is incorporated, registered, or doing business in California must pay the $800 minimum franchise tax .
LLC members who must make estimated tax payments on their share of income should pay them four times a year. The due dates for 2020 are on April 15th, June 15th, September 15th and January 15th, 2020 on a calendar tax year.