LLCs are subject to an $800 annual tax if they are doing business in California or have articles of organization accepted, or a certificate of registration issued by the California Secretary of State. The annual tax is prepaid for the privilege of doing business in California, and is due and payable on or before the 15th day of the 4th month after the beginning of the taxable year. The annual tax must be paid for each taxable year until the appropriate papers are filed.
In addition to the annual $800 tax, every California LLC must pay a fee based on total annual income. The LLC fee is due on or before the 15th day of the 4th month after the close of the LLC’s taxable year. The California Franchise Tax Board has a booklet containing much of what one needs to know about LLCs. For taxable years beginning on or after January 1, 2002, use the following chart to compute the fee:
If total annual income is equal to or over – but not over –
$250,000 to $499,999 the fee is $900 $500,000 to $999,999 the fee is $2,500 $1,000,000 to $4,999,999 the fee is $6,000 $5,000,000 and over the fee is $11,790
If the California Franchise Tax Board (FTB) determines multiple LLCs were formed for the primary purpose of reducing fees, the LLC’s total income from all sources that are reportable to California could include the aggregate total income of all commonly controlled LLC members. “Commonly controlled” means control of more than 50% of the capital interests or profit interests of the taxpayer and any other LLC or partnership by the same persons.
Strategic planning is necessary when working with LLCs. Expert tax advice is essential to accomplish business goals. Call Mitchell A. Port at 310.559.5259 to discuss your ideas.