What is a Limited Liability Company:- A limited liability company (LLC) incorporates both partnership and corporate structures. It is a structure that can be formed to run a business or to hold assets. Now understand that the owners of an LLC are members, and LLCs protect its members against personal liabilities.
Limited Liability Company
An LLC can be any of the following:
-
A disregarded
entity (for federal purposes), that is, if it has only one member.
Single-member limited liability company (SMLLC).
-
A partnership, that is if it has more than one owner.
Limited liability partnership
Limited liability limited partnership.
Series limited liability company
- An LLC
is taxed as a corporation
Understand that an LLC is required to have the same classification for both California and federal tax purposes.
How to Open an LLC in California
To successfully register or organize an LLC in California, contact the Secretary of State (SOS):
Website
California Secretary of State
Phone
916-657-5448
California Secretary of State
Document Filing Support
PO Box 944228
Sacramento CA 94244-2280
For more information, visit Limited Liability Company Filing Information (FTB 3556).
Annual Tax
Note that the yearly tax will be due whether or not you are conducting business until you cancel your LLC.
Thus, you have until the 15th day of the 4th month from the date of filing with the SOS to pay your first-year annual tax.
The annual tax payment is due with LLC Tax Voucher (FTB 3522)
How to Pay Your Annual Tax
Online
Bank account (Web Pay)
Credit card
Franchise Tax Board
PO Box 942857
Sacramento CA 94257 – 0631
Use FTB 3522 if you are paying by mail.
Exceptions to the First Year Annual Tax
LLCs are not subject to the annual tax and fee if the following are true:
- The did not carry out business in California during the tax year
- Their tax year was 15 days or fewer.
Short Form Cancellation
In case you happen to cancel your LLC within one year of organizing, you can file Short Form Cancellation (SOS Form LLC – 4/8) with the SOS. With this, your LLC will not be subject to the annual $800 tax for its first year.
LLC Fee
If you LLC happens to make more than $250,000, you will be required to pay a fee. LLCs must estimate and pay the fee by the 15thday of the 6th month, of the current tax year.
Underpayment
If you fail to make your estimated LLC fee payment by the original due date, you will be subject to penalties and interest. For more information, visit Due dates for businesses.
Filing Requirements
If your LLC meets one or more of the following conditions which are:
- Doing business in California
- Registered with the SOS
Then your LLC must:
- Pay the $800 annual tax
By the 15th day of the month after the beginning of the current tax year.
Use Limited Liability Company Tax Voucher (FTB 3522)
- Estimate and pay the LLC fee
By the 15th day of the month after the beginning of the current tax year.
Use Estimated Fee for LLC’s (FTB 3536)
- File Limited Liability Company Return of Income (Form 568)by the original return due date
In case your LLC files on an extension, refer to Payment for Automatic Extension for LLCs (FTB 3537).
For more information, visit Limited Liability Company Tax Booklet (568 Booklet)
- In a situation where you have income or loss inside and outside California, use Apportionment and Allocation of Income (Schedule R) in determining California source income
For more details, visit Instructions for Schedule R.
Foreign Non-registered LLC
If you happen to be a foreign non-registered LLC that meets all of the following conditions:
- Treated as a partnership
- Has California source income
- Not doing business in California
Then your LLC must:
- File Partnership Return of Income (Form 565)
- Go to the 2019 Partnership Tax Booklet for more details.
Keeping Your LLC Active
In order to keep your LLC active, you are to:
- File the Statement of Information with the SOS
- File and pay your state income taxes.
Suspended LLCs
Since they do not grant automatic extensions to file for suspended LLCs, you are to visit My business is suspended for more details.
SOS Penalty
SOS imposes a $250 penalty if you fail to file your Statement of Information.
How to Cancel Your LLC
Registered with SOS
If you happen to close your business, you must file the needed paperwork with the Secretary of State and SOS.
With SOS, you must:
- File your final current year tax return. Check the applicable Final Return box on the first page of the return.
- Cease from doing business in California after the final taxable year.
Not Registered with SOS
If you are not registered with SOS:
- You must file your final current year tax return. Check the applicable Final Return box on the first page of the return.
- Cease doing business in California, after the final taxable year.
For more clarification and details, you can visit Guide to Dissolve, Surrender, or Cancel a California Business Entity (FTB Publication 1038)
Apportionment and Allocation
If you sell goods to California customers or carry out a service to customers who received the benefit of that service in California or happen to own an intangible used in California, you may have California source of income.
For more details, visit Apportionment and Allocation.
