California Annual LLC Tax

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California LLC Annual Franchise Tax

Quick Start Guide
This Quick Start Guide is a brief overview of how to form an LLC in California.

Detailed Lessons:

 

California LLC Costs:
California state fee: $70
Statement of information: $20 (every two years)
Annual franchise tax: $800 (every year)

Need help?
Hire a reliable service to form your California LLC:
Northwest ($39 + state fee) or LegalZoom ($149 + state fee)


Video Transcript:

The following information is provided for educational purposes only and in no way constitutes legal, tax, or financial advice. For legal, tax, or financial advice specific to your business needs, we encourage you to consult with a licensed attorney and/or CPA in your State. The following information is copyright protected. No part of this lesson may be redistributed, copied, modified or adapted without prior written consent of the author. California has a number of ongoing requirements for your LLC to remain in compliance with the State. The first of these is the Statement of Information which we discussed in a prior lesson. Remember your first Statement of Information is due within 90 days of the approval of your LLC. Then, you’ll need to file it again every two years. It will be due by the anniversary date of the approval of your LLC. If you have not watched this lesson yet, please do so now. The next requirement is the Annual LLC Franchise Tax of $800. California charges an $800 Annual LLC Franchise Tax on LLCs. This tax is due by all LLCs regardless of income or the business activity. This is a “prepay tax”, meaning that it pays for the current year. Your first $800 payment for the LLC Franchise Tax is due by 15th day of the 4th month after your LLC is filed. The month your LLC is filed counts as Month 1, regardless if you file on the 1st of the month, the last of the month, or any day of the month, really. This means that if you were to file your LLC on March 22nd, then you must pay the $800 fee no later than June 15th (in this example, March is Month 1, April is Month 2, May is Month 3, and June is Month 4). Then, every year after your first payment $800 LLC Franchise Tax will be due by April 15th. You pay the $800 LLC Franchise Tax using Form 3522 called the LLC Tax Voucher. We’ve included this form below in the download section, so that you can see it and get familiar with it. Failure to file before the deadline will result in the State charging late fees and penalties, and they will eventually dissolve your LLC if you do not pay the $800 Annual LLC Franchise Tax. This is not a popular requirement for California, but it is mandatory and it is the cost of doing business in the State. There’s no way to get around this tax. If you want to form an LLC in California, you have to pay this $800 tax within 4 months after you file your LLC and then again by April 15th of each year. Next is Form 3536, the Estimated Fee for LLCs. In addition to filing and paying the $800 Annual LLC Franchise Tax, you’ll also have to file a return called Form 3536, Estimated Fee for LLCs, and pay an additional fee only if your LLC will make $250,000 or more during the tax year. The more you make, the higher the fee. For example, again if you’re under $250,000 you don’t have to pay this additional fee, but if you’re between $250,000 – $500,000, the fee is $900. Between $500,000 and a million it’s $2,500, etcetera as you can look at the table there. Again, the fees above are in addition to the $800 Annual LLC Franchise Tax, and again you’ll only have to worry about this fee if you make over $250,000 during the tax year. Form 3536, again the Estimated Fee for LLCs must be filed and paid by the 15th day of the 6th month after your LLC is filed. Then, every year after your first payment, Form 3536 will be due by June 15th. If you make less than $250,000, again, you do not have to file form 3536. You’ll be able to download Form 3536 below this video, but we’re going to recommend that you get help with this as it’s quite complicated. We’ll cover more on this in just a minute. Next, Form 568, LLC Return of Income. In addition to paying the $800 Annual LLC Franchise Tax with Form 3522 (due by all LLCs) and filing and paying the Estimated Fee (for only LLCs with income over $250,000), all LLCs also need to file what’s called an LLC Return of Income, Form 568. Form 568 pays taxes on previous year’s income, just like regular federal taxes. Again, Form 568 is filed by all LLCs regardless of income. Form 568 is due by the 15th day of the 4th month after the end of your taxable year. This will most likely be April 15th if you run your tax year January to December (which a 99%of our members do). Think of Form 568 as a summary of all the LLC’s financial activity during a given tax year. The purpose of filing form 568 is to: report the Estimated Fee for your LLC, report the $800 Annual Franchise Tax, report and pay taxes for any members who are not California residents, report income, deductions, gains, losses cost of goods sold, salaries, and more. We’re also going to recommend that you get help from an accountant with Form 568 as this one is definitely confusing. It’s 7 pages long. Other Tax Requirements and Recommendations. Depending on your LLC’s income, how many members your LLC has, whether or not you have employees, what state the members are a resident of, and what type of business you have, you most likely need to file additional forms (besides what we have already mentioned), and you may also have to pay additional taxes to the state. Such tax documents might be a Schedule K-1, a Schedule EO, a Schedule D, and other documents. Calculating your LLC’s taxes can be complicated and if done improperly can negatively impact your LLC. We strongly recommend that you hire an accountant. Again, California taxes are very complicated. Hiring a tax professional will not only help keep your LLC in compliance with the State, but it will also give you an advisor to go to further business questions. Whether your business turns a profit or loses money, you still need to file tax documents every year. This is not something to be taken lightly. If you want to run a serious business and not get into trouble with the State, you should get assistance in filing your taxes properly. A referral from a friend or someone else you trust is usually the best way to find someone to do your taxes. You can also ask co-workers, acquaintances from local clubs or organizations, your neighbors and other business people. You can also ask your Twitter, Facebook, LinkedIn or other social media friends. It’s as easy as typing into your social media account, “Hey, I just form an LLC. Anyone know a good accountant?” If you can’t get a personal referral, then try doing a search online for “accountant” or “certified public accountant” and looking for someone with good reviews. Also, take a look below this video. We’ve included some good resources to help with your search. You should also want someone who’s a good fit for your company, makes you feel comfortable, and is willing to answer all of your questions. It should be someone you like personally as well as professionally. It’s okay to take your time to find the right person. We recommend talking with at least 2-3 people before making your final decision. A good thing to keep in mind is that these professionals are interested in your business. They’ll gladly give you 10-15 minutes (if not more) of their time, so don’t feel pressured to go with the first person that you talk to. And hey, if you really want to find a rock star tax professional, why not speak to 7 or 8 to make sure you really find the best one. We hope that you find a great tax professional. And that concludes this Lesson.

Form 3522:
“Limited Liability Company Tax Voucher”

• Form 3522 is used to pay the $800 Annual Franchise Tax each year.

• Download Form 3522: FTB Forms page > Tax year: select the appropriate year > Taxpayer type: “Limited Liability Companies” > Form type: “Income Tax Forms” > click “Get forms” button. Look for Form 3522 and click the download link.

All LLCs in California must file Form 3522 and pay the $800 Annual Franchise Tax every year, regardless of revenue or activity. Said another way, there’s no way to avoid this fee.

• The first $800 payment is due the “15th day of the 4th month” after your LLC is approved. We know that sounds like 4.5 months after your LLC is approved, but it’s actually 3.5 months. For example, if your California LLC is approved in November, November is counted as “month 1”, so 4 “months” after that is February. And the 15th day would be February 15th.

• So for example, if your LLC is approved in November of 2018, then your first $800 payment will be due by February 15th, 2019. This $800 is paying for the 2018 tax year since the LLC existed from November to December. Then, just two months later, you’ll owe another $800 payment, due by April 15th, 2019. This 2nd $800 payment is “going forward”, paying for the 2019 tax year. That’s two back-to-back payments totaling $1,600.

• We’ve mentioned our future file date attachment (that can be filed with your Articles of Organization) throughout our California LLC lessons, but we’ll mention it again here… just in case you’re reading this before you’ve formed your LLC. So the back-to-back payments come into play if your LLC is approved late in the year (October, November, or December). The trick to pushing that 2nd $800 payment ahead – again if forming your LLC late in the year – is to give your LLC a future file date of January 1st. You can also just wait until the last week in December or sometime in January to submit your Articles of Organization to the state. Please note, if using a future file date, it can’t be more than 90 days ahead.

• So it’s really the 1st and 2nd payments which can be a little tricky to figure out. In summary, the first $800 is due 3.5 months after your LLC is approved. The 2nd $800 is due on April 15th. Then anytime April 15th rolls around again, you’ll owe another $800.

Form 3536:
“Estimated Fee for LLCs”

• Form 3536 is used to pay an Estimated Fee for your California LLC if it will make more than $250,000 in annual gross receipts (total revenue). If your LLC will not earn that much in annual gross receipts (total revenue), then you don’t need to file Form 3536.

• This fee is called “estimated” because you need to look over you LLC’s finances and see how much money has been made so far in the year. Then you need to forecast ahead and evaluate what your LLC’s annual gross receipts (total revenue) are likely to be.

• Download Form 3536: FTB Forms page > Tax year: select the appropriate year > Taxpayer type: “Limited Liability Companies” > Form type: “Income Tax Forms” > click “Get forms” button. Look for Form 3536 and click the download link.

• This is first due by the “15th day of the 6th month” after your LLC is approved. As we learned earlier, although that sounds like 6.5 months after your LLC is approved, it’s really 5.5 months after your LLC is approved. For example, if your California LLC is approved in May of 2018, then May is “month 1”. And 6.5 months after that is October. And the 15th day would make that October 15th, 2018.

• After that first due date, any future Estimated Fees must be paid and filed by June 15th each year.

Form 568:
“Limited Liability Company Return of Income”

• All California LLCs must file Form 568, also known as a “Limited Liability Company Return of Income”.

• Form 568 is the state-level tax return for your LLC. And similar to your federal tax return with the IRS, which has “attachments” like forms and schedules, your LLC’s Form 568 will likely have California-specific schedules and forms attached to it as well.

• Download Form 568: FTB Forms page > Tax year: select the appropriate year > Taxpayer type: “Limited Liability Companies” > Form type: “Income Tax Forms” > click the “Get forms” button. Look for Form 568 and click the download link. Also download the “Booklet” for instructions and more details as well as any applicable 568 schedules.

• Depending on how your LLC is taxed by the IRS, Form 568 will typically be due by March 15th or April 15th each year. We strongly recommend working with an accountant to make sure you file your taxes properly.

Finding a California Accountant

We strongly encourage you to work with an accountant and/or a tax attorney after you form an LLC in California. It’s also a good idea to speak with a few accountants before your LLC is even formed.

You see, unlike most states, where an LLC’s annual report is filed with the Secretary of State (and it’s a typical “fill-in-the-blank-and-update-your-contact-info” form), your California LLC’s “annual reports” are essentially tax filings (franchise tax, estimated fee, tax on income, and more) paid to the state’s tax authority, the Franchise Tax Board. Said another way, they are far more complicated!

So not only will an accountant help you file your federal, state, and local returns properly, but they’ll be available to discuss tax strategies, such as if and when it makes sense to have your LLC taxed as an S-Corp, among other things.

We have a strategy called “knights of the roundtable” which you can use to find and interview potential accountants. You can read about that here: how to find an accountant for your LLC.

California Franchise Tax Board Contact Info

Hours:
7:00am – 5:00pm, Monday to Friday (Pacific Time)

Phone:
800-852-5711

Wait times:
Wait times can be quite long if you call during the middle of the day. We recommend waking up early and calling them at 7:00 a.m.

FTB live chat:
https://www.ftb.ca.gov/aboutFTB/Live_Chat.shtml

FTB homepage:
https://www.ftb.ca.gov/

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Matt Horwitz
Founder & Educator at LLC University
Forming an LLC shouldn't be so complicated. Our step-by-step guide will make the process a breeze – and no complex legal jargon! We teach people how to form an LLC for free in all 50 states. We hope you find our free guides and resources helpful in your entrepreneurial journey.

87 Comments

  1. zhiwei guo March 19, 2017

    I registered a INC company in the end of 2016 without any operation so far, do I have to pay any type of annual fee?

    reply
    • Matt Horwitz March 20, 2017

      Hi Zhiwei, yes, you need to pay the minimum $800 annual franchise, regardless of activity. More info for Corporations is here: https://www.ftb.ca.gov/businesses/structures/c-corporation.shtml#filing_guidelines

      reply
      • caryn March 2, 2018

        I opened an LLC in 2014. I have not be active and will be dissolving. I did not pay my $800 for 2017 (because I am going to dissolve it). But I can’t remember if I paid it for 2016 which I did not have any activity either. How can I check if I paid that franchise tax. Is there an online record of my payments? How do I know if there are fee’s accumulating? Thx

        reply
        • Matt Horwitz March 2, 2018

          Hi Caryn, the best thing do to is call the California Franchise Tax Board and ask for a review of your account. They’ll let you know where the LLC stands. It’s best to call shortly after opening hours in order to avoid long wait times. Hope that helps.

          reply
  2. Homer April 5, 2017

    My LLC was registered on 12/23/2016 but I didn’t start my consulting services until 1/9/2017. Do I need to file form 568 by April 15, 2017 and pay $800 fee and still pay another $800 for 2017 annual fee?

    reply
    • Matt Horwitz April 5, 2017

      Hey Homer, you just made it ;) You don’t have to pay an $800 fee for the 2016 tax year (therefore avoiding the dreaded “back-to-back” $800 Annual Franchise Tax payments). The reason why is that you fall within the “15 Day Rule” (your LLC was formed within 15 days or less of January 1st).

      You just have to pay the 2017 $800 payment, which is due by April 15th, 2017. Please note, if your gross receipts are going to be over $250,000 for the 2017 tax year, you must also file and pay the Estimated Fee (Form 3536).

      As an FYI to others, if Homer’s LLCs was formed on December 5th, he would owe back-to-back payments. The first payment would be due the 15th day of the 4th month after the LLC is formed. December is “month 1”, so the $800 payment for 2016 would be due by March 15th. Then, just one month later, the $800 payment for 2017 would be due by April 15th.

      For this reason, if you’re thinking of forming a California LLC late in the year (October, November, December), you can either include a Future File Date Attachment (requesting a future file date of January 1st) or just wait until the last week in December or early January to submit your Articles of Organization to the state. This prevents you from paying the “back-to-back” $800 Annual Franchise Tax payments (a total of $1,600 paid very close together).

      Hope that helps, Homer! Let us know if you need anything else.

      reply
      • Kristian Crump October 30, 2017

        Hello Matt,

        I just found your content on YouTube and am grateful for all of your guidance. I am looking to form a DIY LLC in CA and would like to have it start in Jan. 2018. How long should I expect the process to take? Should I start 60, 45, 30 days prior to the new year?
        Ideally I’m timing this to avoid the “back to back” mentioned in the question above.

        Thank you for your amazing service and value to the marketplace.

        Kristian…

        reply
        • Matt Horwitz October 30, 2017

          Hey Kristian, you’re very welcome. Thanks for the kind words! :-) Good call on waiting until 2018 to avoid the “back to back” $800 franchise tax payments ($1,600 total). Most states have a “delayed effective date” section in the Articles of Organization, but California doesn’t by default. However, you can request a future file date of January 1st 2018 via a Future File Date Attachment. Hope that helps!

          reply
          • Kristian Crump November 2, 2017

            Hi Matt, Yes, this helps tremendously. Thank you for the quick reply and awesome service! You Rock!

            reply
            • Matt Horwitz November 3, 2017

              You’re very welcome Kristian!

              reply
          • Christina April 10, 2018

            Hi Matt – FYI I requested an “effective date of 1/1/2018” on the cover letter of my Articles of Organization for my LLC that I sent in the last week of December 2017 and it was returned because you cannot request/require an effective date in California. I want to help others avoid that mistake! It cost me a few weeks in processing time having to file all over again after I got the declined form back.

            For LLCs making less than $250,000 annually, do you still file the Form 3536 – 2017 Estimated Fee for CA LLCs form to just say no, I didn’t make $250k?

            Thank you for this invaluable website!!

            reply
            • Matt Horwitz April 13, 2018

              Hey Christina, requesting a future file date via the Mail Submission Cover Sheet used to work (most LLC examiner’s accepted it), but that’s no longer the case. Instead, you’ll need to use a Future File Date Attachment, which should be filed along with the Articles of Organization (it then becomes a part of the Articles of Organization) to request a future file date of January 1st. And regarding Form 3536 (Estimated Fee for LLCs), no, this doesn’t need to be filed if your LLC is making less than $250,000 annually. Hope that helps!

              reply
  3. Ron June 15, 2017

    Hello,
    My name is Ron, I have two question would like to ask from you if you have time to answer it.
    1) can I start an llc if have 100k in debt
    2) how much do you guys charge for “registered agents”
    Thank you

    reply
    • Matt Horwitz June 16, 2017

      Hi Ron, yes, you can start an LLC regardless of your personal financial situation. We don’t offer Registered Agent services ourselves, but we do have recommendations on our website. Thanks and hope that helps.

      reply
  4. Amandeep October 12, 2017

    Hi sir
    I want to open a llc in California. Should i wait till january to save the franchise tax ?
    Because i read somewhere that first financial year we dont have to pay franchise tax. Is that true ?
    Please guide me should i go ahead by this month or should i wait till January ?
    Thanks

    reply
    • Matt Horwitz October 18, 2017

      Yes, if you don’t need the LLC open in 2017, wait until January to file or use a Future File Date Attachment and state that your LLC has a future file date of January 1st. This will help you avoid back-to-back $800 franchise tax payments… which is $1,600 paid within a few months. Hope that helps!

      reply
      • Amit Gaur January 31, 2018

        This back to back Franchise tax is a pain. They should highlight this information on the official page while registering for LLC. It’s like a hidden trap in the name of Taxes.

        reply
        • Matt Horwitz January 31, 2018

          I hear you 100%. It really is confusing at first glance and the majority of people don’t even know about it. We will do the best job we can at warning people and offering recommendations (such as waiting until January, if possible) wherever we can. Thank you.

          reply
  5. Clayton Citrano October 29, 2017

    Hello,
    If I liquidate my California LLC by Dec. 31st of 2017 will I owe the $800 fee in 2018. I paid the $800 fee in April of 2017 for this year. I want to make sure I have enough funds in the LLC bank account for any tax liabilities next year. The LLC has no revenue in California. Thanks Matt.

    reply
    • Matt Horwitz October 30, 2017

      Hey Clayton, if your LLC is properly dissolved by the end of the year, you will not owe an $800 franchise tax payment for 2018. I recommend getting things done as soon as possible though, just so it’s not filed to close to the end of the year. The CA SOS is very busy and things can take a number of weeks.

      reply
      • Clayton Citrano November 1, 2017

        Thanks Matt for your quick response.

        reply
        • Matt Horwitz November 1, 2017

          You’re welcome Clayton.

          reply
  6. Barbara November 3, 2017

    If a single-person LLC is dissolved with unpaid franchise taxes outstanding, will that person be individually liable for the unpaid taxes?

    reply
    • Matt Horwitz November 3, 2017

      Hi Barbara, you’ll need to speak with a California attorney regarding this. Thanks for understanding.

      reply
  7. Buzzed Aldrin November 5, 2017

    Must an LLC submit filings and pay state taxes only to the state where it’s registered, or to the state where it physically operates?

    You suggest getting an LLC in one’s home state, but the thought of paying $800 minimum every year to the CA FTB parasites is sickening.

    Thanks for any advice!

    reply
    • Buzzed Aldrin November 5, 2017

      Answered my own question per the “Taxes are paid where money is made” slogan on your other pages.

      reply
      • Matt Horwitz November 8, 2017

        Nice! Glad you found it. Thanks for reading around the site a bit.

        reply
    • Matt Horwitz November 8, 2017

      You most certainly need to file/pay taxes where the money is made. In your case, CA. If you also register the LLC, you’ll likely (but it depends) need to file a return in that state, and then apportion the income to CA. If you live and do business in CA, it’s really best to form there for various reasons. You can find more info on this topic here: doing business in California. Hope that helps.

      reply
  8. Sheila November 22, 2017

    Hi Matt,

    I want to form my LLC now but as you know we are at the end of the year so of course I will have to wait until January to form it so as not to pay the back to back fees. My question is, I need to have a business account opened asap so how can I get the business account now and while waiting to form the LLC in January?

    reply
    • Matt Horwitz November 22, 2017

      Hi Sheila, you can’t open an LLC business bank account unless the LLC is in existence (aka effective). If you want to file now, but have the LLC become effective on January 1st (to avoid the back-to-back franchise tax payments), you can use a Future File Date Attachment. Hope that helps!

      reply
  9. Kevin December 13, 2017

    Hey Matt,

    First off, thanks for the thorough information! I just filed an LLC in August 17 and paid the annual tax. Am I to correctly assume that the Form 568 isn’t due until January or February? Is there a way I could e-file this information or would I have to mail it in?

    reply
    • Matt Horwitz December 22, 2017

      Hey Kevin, you’re very welcome! If you operate on the calendar year of Jan. 1 to Dec. 31 (which most filers do), your LLC’s Form 568 will be due by either March 15th or April 15th, depending on how your LLC is taxed for U.S. federal tax purposes with the IRS. If your LLC is taxed like a Sole Proprietorship, it’s April 15th. If your LLC is taxed like a Partnership, it’s March 15th. And yes, you can e-file Form 568 online via CalFile. Hope that helps.

      reply
  10. Noel January 9, 2018

    Hi Kevin,
    If I dissolve my LLC this month and have no business activity, do I still need to pay the $800 minimum annual tax for 2018? During my research, I find the page regrading AB 2341: https://www.ftb.ca.gov/businesses/faq/taxClearance.shtml

    reply
    • Matt Horwitz January 15, 2018

      Hi Noel, the cutoff for dissolving an LLC and not owing 2018 franchise tax was January 14th. So your LLC will still owe for 2018. Make sure to make your payment final return, or mail the FTB a letter. See #19 here: https://www.ftb.ca.gov/businesses/faq/ab2341faq.shtml.

      reply
  11. Amit Gaur January 31, 2018

    Hi Matt, I registered an LLC on October 20th, 2017 and have not started the operation yet. Is there any way to get exempt from $800 Franchise Tax for the first year in my case?
    Thank you!

    reply
    • Matt Horwitz January 31, 2018

      Hi Amit, no, unfortunately there is not. Your 2017 payment was due January 15th. And then you’ll need to pay for 2018 by April 15th.

      reply
      • Amit Gaur February 1, 2018

        Thanks for the prompt reply Matt.
        I can’t believe I have to pay them $800 in taxes for nothing, what a way to make money California!!!
        BTW, your website is awesome! Keep up the good work and thank you again!

        reply
  12. Steve V February 22, 2018

    Hi Matt,
    Thank you for all your very helpful information.
    I have a different scenario I would appreciate your thoughts on.
    On February 5, 2018 my LLC was registered with California SOS.
    About February 27, 2018 depending on the mail and how fast SOS processes the form, the LLC was dissolved, not having done any business.

    Will I still owe the $800 tax?
    If not, what form should I file?

    Thanks for your help.

    reply
    • Matt Horwitz February 25, 2018

      Hi Steve, I wish I could be more helpful, but I’m not 100% sure on this. I recommend contacting the CA Franchise Tax Board.

      reply
      • Steve February 25, 2018

        Thank you Matt. I was able to get in touch with the FTB. They said if I dissolved with the SOS within a month of registration with the SOS there would be no tax due, but a return still has to be filed.

        reply
        • Matt Horwitz February 25, 2018

          Hi Steve, this is great news. Thanks for following back up and sharing the details. We greatly appreciate that and will keep this noted in case someone else asks. Cheers!

          reply
  13. Christina Lee February 26, 2018

    Hi Matt,
    We have closed our s corp in November 2017 and now filing final return this month 2018. Must we have to pay $800 with the final return?
    Thanks in advance for your reply!
    Chris

    reply
    • Matt Horwitz February 26, 2018

      Hi Christina, first, “closed an s-corp” is a bit ambiguous, so I’m not sure what you mean. An S-Corp is not a legal entity formed with the state, but instead a tax election made with the IRS that “sits on top of” either an LLC or a Corporation. So, if you formed an LLC or a Corporation with the California Secretary of State, did you dissolve the entity? And has the state returned approval of such in 2017? If so, then you don’t owe an $800 payment since a payment made in 2018 would effectively be paying for the 2018 tax year (which is not needed, since your entity – again, if properly dissolved with the Secretary of State – isn’t going to exist then). That is also assuming you made an $800 payment in April of 2017. Hope that helps.

      reply
    • joe March 20, 2018

      did you ever find out what to do? I dissolved mine in July 2017 and filing 2018 taxes now wondering if the $800 is required.

      reply
      • Matt Horwitz March 27, 2018

        Hi Joe, if you paid your $800 annual franchise in 2017, you most likely paid for the 2017 tax year (unless that payment was for the 2016 tax year for an LLC that was created late in 2016), however, I recommend calling the California Franchise Tax Board to review your account. I recommend calling early in the morning (shortly after they open) to avoid longer hold times. Hope that helps.

        reply
  14. Iryna Korolenko March 20, 2018

    Hi,

    I am a Sole Member LLC filed on December 7th, 2017. I have just paid $800 annual tax and was going to pay another $800 for 2018 due by April 15th, when I read the article on “disregarded entity” for sole member llc..

    I filed all the expenses in my personal tax return. So, does it mean that I am not supposed to pay $800+$800?

    Please advise.

    How do people cancel payment made to IRS?..

    Thank you,
    Iryna.

    reply
    • Matt Horwitz March 27, 2018

      Hi Iryna, the $800 LLC Annual Franchise Tax is paid to the California Franchise Tax Board, not the IRS. Where did you send your payment of $800? It should have been sent to the California Franchise Tax Board along with Form 3522 (“Limited Liability Company Tax Voucher”). Since your LLC existed for 1 month in 2017, you owe an $800 payment for 2017, which was due by March 15th, 2018. This essentially “back paid”. The next paying is “going forward” paying for the 2018 tax year and that $800 was due April 15th, 2018. We recommend speaking with an accountant and the Franchise Tax Board to review your account and see if anything is due. And regarding the IRS, an overpayment can stay on the account as a credit or you can request it as a refund during next year’s tax return. Hope that helps.

      reply
      • Iryna Korolenko April 19, 2018

        Matt, yes I meant Franchise Tax Board. I sent $800 before March 15th online. I read that disregarded entities (sole member llc) file everything in personal form. Why do I pay another $800 in 2018 not in 2019?..
        Do sole member llc file form 3522?

        Thank you very much,
        Iryna.

        reply
        • Iryna Korolenko April 19, 2018

          Found this:
          Credit Card
          Use Discover, MasterCard, Visa or American Express Card to pay your
          business taxes. Go to officialpayments.com. Official Payments Corp.
          charges a convenience fee for using this service. If paying by credit card, do
          not file form FTB 3522.

          reply
          • Matt Horwitz April 21, 2018

            Hi Iryna, good find. Thank you. In regards to your question about “why do I pay another $800 in 2018, not in 2019?”, it’s because you owed $800 for 2017. That was due 3.5 months after the LLC was formed (by March 15th 2018). Then you pay the 2018 tax year by April 15th 2018. You had back-to-back payments because the LLC went into existence late in the year of 2017. It’s the 1st payment which is a “quirk”. Then every tax year is paid by April 15th. Hope that helps.

            reply
  15. MARIA LORNA A. KUNNATH April 2, 2018

    QUESTION 1. Can I use CalFile for filing FORM 568?
    QUESTION 2. If I file my Form 568 personally at the Franchise Tax Board FTB Office in Sacramento and pay the $800 Annual Tax at the same time, what will the registered date of filing be?

    The reason I asked question 2 is because last year I prepaid (via Official Payments) $800 Annual Tax weeks ahead and filed /mailed Form 568 which was signed received by FTB weeks ahead of the deadline YET, I was considered late by FTB declaring that said form was not recorded in their database which even if it was their fault was blamed on me by declaring my submission late. I then appeared personally to file an exact copy of form 568 YET, I was still considered late because according to them it is not yet inputted in their database. FTB then kept charging me late fee and on my records show a fee above $300 over and above the early payment of $800. Do I smell a big fat scam on this case blaming the filer for FTB gross incompetence and inefficiency by charging them late fee because their database office is late on RECORDING returns mailed to their office?

    reply
    • Matt Horwitz April 8, 2018

      Hi Maria, I’m not sure regarding CalFile. Please call the California Franchise Tax Board to double-check. It sounds like you’re trying to pay an $800 annual franchise tax for an LLC that does not yet exist. Did you form an LLC?

      reply
  16. Neena April 12, 2018

    Hi Matt, First of all great site and great information, thank you!
    I created an LLC in CA in Oct 2016 and (wrongly) assumed that I will only need to file for taxes for 2017. I have not yet started business and so the LLC only exists on paper. I am the only owner / member of this LLC.

    So now it seems I have to file taxes for year 2016 and 2017.

    I am confused between Form 568 and Form 3522. Do I have to file both?
    Is the $800 tax paid with each form and for each year?
    If so will there be a $800+$800 = $1600 taxes for each year (2016 and 2017)?
    How will it look in 2018?
    Is there likely to be any penalty due to any late payments?

    Sorry, but this seems very confusing and the information about these forms do not refer to each other.

    thanks a lot in advance.

    reply
    • Matt Horwitz April 14, 2018

      Hey Neena, short answer is to work with an accountant and get your FTB account in good standing. You can also call the FTB for full details. Yes, there are likely penalties and interest. Please check this page again as we just made some updates a few days ago to better explain things. You will own an $800 franchise tax payment for 2016, 2017, and 2018 (Form 3522 is used for this). Form 568 was due April 2017 (paying for 2016) and April 2018 (paying for 2017). Hope that helps.

      reply
  17. John P May 2, 2018

    I started LLC in 2015. Paid all the 800 annual fees up to now but did not file any of the 568 forms
    By mistake. Now that I know it has to be done I am presently getting it done. What
    Are my consequences for late filings. I shouldn’t owe any tax .

    reply
    • Matt Horwitz May 13, 2018

      Hi John, while you may owe $0 tax, the 568 filings are still required. This is often referred to as an “informational return” or “zeroed out return”. However, your LLC will be subject to a late-filing penalty. You can either call the Franchise Tax Board to figure out the total amount owed, or you can file your 568 Returns and then wait for the bill from the Franchise Tax Board. Hope that helps.

      reply
  18. GLENN K May 12, 2018

    I have a LLC in California that operates as a disregarded entity (sch c)
    The amount reported on schedule IW line 1a: Is it gross receipts? Or net profit? If net profit, can I subtract SEP contributions and SE health insurance from the amount reported? Worst instructions I’ve ever seen.

    reply
    • Matt Horwitz May 16, 2018

      Hi Glenn, I hear your frustrations. However, we don’t offer any information on how to complete tax forms. For this, you would need to speak with an accountant. Thanks for your understanding.

      reply
  19. Sarah A June 4, 2018

    Hi Matt,

    Your website has been a tremendous source of information. Thank you for all the great work!
    I have a few questions and would be grateful if you could provide some insight. I wanted to know if it is possible to add LLC members to a single member LLC once it has been formed i.e. Articles of Organization has been approved and Statement of Information Form has been submitted. The LLC also has an EIN already. If yes, what is the procedure?
    Also, I understand that California is considered a ‘community property state’, so if an LLC is wholly owned by a husband and wife, it can be treated as a disregarded entity for tax purposes. Now if the single member LLC is owned by the husband and he wants to add his wife to the LLC, does he need to obtain a new EIN for the LLC? Does the IRS need to be informed about this member addition? Will the LLC now be considered a ‘partnership’ for tax purposes?

    Thanks for your help.

    Regards

    reply
    • Matt Horwitz June 17, 2018

      Hi Sarah, you’re very welcome! Thanks for the kind words :) We have info on husband + wife LLCs in community property states here: Qualified Joint Venture LLC. You’ll need to sign an Operating Agreement and make it owned by one “person”, written as “John and Mary Doe, 100%” or “John and Mary Doe, married couple”. You’ll need to send a letter to the IRS and let them know you’d like for the husband and wife LLC to be taxed as a Sole Proprietorship. Hope that helps.

      reply
  20. Mihail June 13, 2018

    Hey guys!
    Quick question, when paying $800 for “Form 3522” should I use my business bank account or is my personal bank account fine to use.
    I am the only member of the LLC.

    Thanks

    reply
    • Matt Horwitz June 18, 2018

      Hi Mihail, it’s best to use the LLC business account to pay for business expenses. I’d also say it’s not a major issue though in this case. Hope that helps.

      reply
  21. lydia June 14, 2018

    Hi, at approximately what income threshold does it make sense to change from a simple Sole Proprietor to the more complex Single Member LLC (& maybe file as an S-Corp) just to save on self-employment or other income taxes?

    Sole is so simple and LLC requires more time, efforts & money including the infamous 800 in CA taxes, etc.. so it’s not worth the trouble if I’m not going to save a bunch. (I realize another reason to be an LLC is the limited liability & more pro business sounding name, etc.. but I have no assets & rent so can’t see being sued for my design services business.) THX for any insights!!!!

    reply
    • Matt Horwitz June 18, 2018

      Hi Lydia, different accountants say different things, but generally, once the LLC is generating $50k to $70k in net income, the LLC taxed as an S-Corp makes sense for the sole owner. The administrative/payroll costs of maintaining the LLC/S-Corp are worth the savings in self-employment taxes. We have more info here: LLC taxed as S-Corp. Hope that helps!

      reply
  22. QUYNH NGUYEN October 12, 2018

    Dear Matt,

    Thank you for the valuable articles that help us a lot. My restaurant will not be opened until August 2019. To avoid $800 annual franchise tax, I understand that I shouldn’t register my LLC until January 1, 2019.

    However, to be able to sign a lease in November 2018, I feel like it’s better to have a LLC company. But I do not want to pay $800 tax. I think I will sign a lease with a LLC and with Future File Date Attachment, so my LLC will not formed until next January 2019. Do you think it okay?

    Thank you

    reply
    • Matt Horwitz October 12, 2018

      Hey Quynh, I think you’ll be fine waiting until January to form the LLC but signing the lease in November. I wouldn’t attach your Future File Date Attachment to the lease (if that’s what you meant). It could just confuse the leasor. It’s good practice to sign the lease as “ABC Company, LLC and/or their assigns”. This way if you for some reason, ABC Company, LLC got rejected when you filed it, and you then had to file under a different name, you could just assign the lease to the new LLC. Although you never really had authority to sign on behalf of ABC Company, LLC, the leasor likely won’t care (or care to look) – they’re more concerned about making sure they get their money. Hope that helps.

      reply
      • Quynh Nguyen October 12, 2018

        Thank you very much for your quick answer.

        It helps very much. First, I will file name reservation request to secure the name for 60 days. After that, I will sign a lease with “Quynh, llc”. In January, Once my llc company is approved, My “Quynh, llc” is still the same as the name I signed on lease.

        What do you think?

        Thank you so much for your time.

        reply
        • Matt Horwitz October 12, 2018

          I like this a lot actually. It’s better than what I first suggested. Good thinking!

          reply
  23. Chan October 12, 2018

    Hi Matt, I registered my LLC in January 2018 and have not made any sales yet, just made purchases from other vendors. If I dissolve the LLC before the end of this year, will I still owe the $800 fee? Alternatively, I do wish to keep the LLC, but put it on “hold” if you will as I will be doing a different business – is this possible to avoid continuous payments of the $800 fee? Thanks in advance!

    reply
    • Matt Horwitz November 22, 2018

      Hi Chan, yes, you still owe the $800 annual franchise tax. And unfortunately, there isn’t a way to put the LLC on “hold”. Hope that helps.

      reply
  24. Ruben Vasquez October 13, 2018

    I filed me LLC in July 5 2018 and my franchise tax is due Oct 15 2018 correct ?
    Also I don’t have enough money to cover this as I’m barely getting my business together as a I have a full time job. What can I do to get this waived or postponed to a later date , once I get more income ?

    reply
    • Matt Horwitz November 22, 2018

      Hi Ruben, correct. Your first payment of the $800 annual franchise tax (paying for the 2018 tax year) is due by October 15th, 2018. Your 2nd payment will be due by April 15th, 2019. Unfortunately, there isn’t a way to get the fee waived or postponed. Hope that helps.

      reply
  25. Siri October 19, 2018

    Hi Matt,

    Thank you for you useful articles. I have a question about the LLC fee. I registered my LLC on Sep 21, 2018 and would like to dissolve it on October 19, 2018. Do I still need to pay $800 fee?

    Thank you for your reply in advance.

    reply
    • Matt Horwitz November 22, 2018

      Hi Siri, you will need to call the California Franchise Tax Board to check on this. Thanks.

      reply
  26. Eric October 31, 2018

    I think I might know the answer to this but wanted to put it here for clarification as I have been searching and wanted some clarity.

    My situation:
    1. I am filing for a new LLC in CA with a future date attachment of Dec 18. This falls under the 15day rule ( I will not be doing business until Jan, 1 2019) so I will not pay the back-to-back $800 and will submit the $800 Annual Tax with a Form 3522 on (or before) Apr 15 2019
    2. I will not make more than $250,000 so don’t need the Form 3536
    3. Do I file Form 568 on/before Apr 15 2019 or not until Apr 15 2020? I am assuming the 568 gets filed in 2020 to cover 2019 as it is not an estimated/pre year thing like 3522 but looking back on the year like standard personal taxes?

    reply
    • Matt Horwitz November 22, 2018

      Hi Eric, you are correct on all:
      1. Correct. Your first $800 annual franchise tax (paying for the 2019 tax year) will be due on or before April 15th, 2019.
      2. Correct. No need to file the Estimated Fee for LLCs.
      3. Your first taxable year will be 2019, so Form 568 isn’t due until April 15th, 2020.
      Hope that helps!

      reply
  27. Shabazz November 15, 2018

    Do you still support NorthWest Registered Agent, LLC as being one of the best companies for creating your LLC and being a Registered Agent? Thanks.

    reply
    • Matt Horwitz November 23, 2018

      Hi Shabazz, yes, we feel Northwest Registered Agent offers the best customer support and has the best prices. They also don’t sell your information to 3rd parties, like a lot of other companies do. Hope that helps.

      reply
  28. Toni November 19, 2018

    Matt,
    Thanks a million for the information you put together. It has cleared up the water for me, but I just want make sure I’ve got this straight (I know i’ll owe a bunch of penalty fees for filing late).
    – My LLC was approved on 10/5/2017
    – I ended up cancelling the business on 10/5/2018 (not profitable).

    From what I understand, I owe $800 (form 568) for 2017 and $800 (form 3522) for 2018 plus penalties. Is this accurate?

    Thanks
    Toni

    reply
    • Matt Horwitz November 23, 2018

      Hi Toni, you’re very welcome! In situations like this, we recommend speaking with both the CA Franchise Tax Board as well as an accountant to make sure everything is filed and paid for properly. Thank you for your understand.

      reply
  29. Nawar Mustafa December 6, 2018

    Hi Matt,
    If my California LLC is activated on December 18th of 2018 will I be avoiding the back to back fees?

    reply
    • Matt Horwitz December 6, 2018

      Hi Nawar, yes, you will be avoiding them since your LLC will be taking advantage of the 15-day rule. Meaning, since your tax year will be 15 days or less, you don’t owe an $800 franchise tax payment for 2018. Your 2019 payment will be due by April 15th. Hope that helps.

      reply
      • Nawar Mustafa December 6, 2018

        Thank you very much for the reply. It was really helpful and this is a really great site.

        reply
        • Matt Horwitz December 7, 2018

          Thanks so much Nawar! You’re very welcome.

          reply
  30. robert December 11, 2018

    i have my LLc corporation from 2010 i did not pay the $800 for the year 2016 2017 2018 .how can i void the penalty OR decrease the amount owed. No business activity was made from 2016-2017, I’m trying to avoid the $800 or the penalty only

    reply
    • Matt Horwitz December 11, 2018

      Hi Robert, you’ll need to contact the California Franchise Tax Board and/or a tax attorney for assistance.

      reply

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