GUIDE to the California LLC Franchise Tax

GUIDE to the California LLC Franchise Tax

December 30, 2022 Off By manuelagcvh



You’re ready to get the ins and outs related to your California LLC franchise tax.

What is the Annual Franchise Tax?
The annual franchise tax is a type of business tax required when you are doing business in the state of California.

What does it mean to “do business” in California?
– Operating out of or having a physical presence in California
– Having or applying for a business license in California
– Deriving significant portions of your company’s revenue from California
– Having employees that work in California or having to pay state payroll taxes

Additional fees you might have to pay with your California LLC

What is the estimated LLC fees?
If your LLC makes over $250,000 in annual gross receipts (total revenue) in the state of California, you will be required to pay an additional fee – see the chart https://www.ftb.ca.gov/file/business/types/limited-liability-company/index.html

What is Form 568?
Limited Liability Return of Income (Form 568) https://www.ftb.ca.gov/forms/2021/2021-568.pdf is the state-level tax return for your LLC.

You will have California-specific schedules and forms attached to it. For detailed information and due dates, you can visit the Limited Liability Company Tax Booklet (568 Booklet) https://www.ftb.ca.gov/forms/2021/2021-568-booklet.html

How to Pay the California Annual Franchise Tax
To pay the annual franchise tax online = https://www.ftb.ca.gov/pay/
To pay the annual franchise tax by mail = https://www.ftb.ca.gov/forms/2022/2022-3522.pdf

Qualified Franchise Tax Exemptions:
The 15 day rule: If you incorporate your business within 15 days of the end of the tax year but do not conduct business in those 15 days (BOTH requirements need to be met in order to claim this exemption), you are not required to pay the minimum franchise tax.

Short form cancellations: If you decide to dissolve your LLC within one year of organizing, you can file for short form cancellation (Form LLC-4/8) https://bpd.cdn.sos.ca.gov/llc/forms/llc-4-8.pdf with the Secretary of State.

NEW first year exemptions: This is a new exemption based off the state’s 2020 Budget Act. Any California LLC registered between Jan 1, 2021 and Dec 31, 2023 will not have to pay the annual franchise tax during their first year in business.

Be sure to check out all our related videos and articles from our channel and for any questions or things you want to know add a comment in this video!

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REFERENCE VIDEOS
5 Things You Should Know Before Forming Your California LLC
https://youtu.be/x552_l6sVAU

How to form a California LLC
https://youtu.be/fLu3S3G0jjs

Benefits of a California LLC
https://youtu.be/gvlffEAoAsc
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QUICK LINKS
Form 568
https://www.ftb.ca.gov/forms/2021/2021-568.pdf

Limited Liability Company Tax Booklet
https://www.ftb.ca.gov/forms/2021/2021-568-booklet.html

Web Pay
https://www.ftb.ca.gov/pay/

Form LLC-4/8
https://bpd.cdn.sos.ca.gov/llc/forms/llc-4-8.pdf

California LLC Franchise Tax Waived in First Year
https://www.corpnet.com/blog/california-llc-franchise-tax-waived-in-first-year/

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REFERENCE ARTICLES
California Annual Franchise Tax 101
https://goremote.virtualpostmail.com/article/california-llc-franchise-tax

Ultimate Guide to Form Your California LLC
https://goremote.virtualpostmail.com/article/ultimate-guide-to-form-your-california-llc
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