Confusion on CA minimum tax laws imposed on LLCs... help! (San Diego: lenders, attorneys)

[madmols]

I also have a question similar to thepinksquid's. I have decided to dissolve my business and had filed for an LLC 1/6/12. They have told me I can cancel the LLC, however, if I did ANY business after it was filed, I am on the hook for the LLC $800 fee. I barely made $1000 gross (in 2 months)since the filing and thus decided it was not a good business venture afterall. However, it is something. I have to file that with the IRS. Is there anyway out of this $800?

[DMenscha]

Whole lotta people should have gotten some legal advice before starting a business. Successful business folks know the rules before they find out the hard way.

[thepinksquid]

Originally Posted by madmols

I also have a question similar to thepinksquid's. I have decided to dissolve my business and had filed for an LLC 1/6/12. They have told me I can cancel the LLC, however, if I did ANY business after it was filed, I am on the hook for the LLC $800 fee. I barely made $1000 gross (in 2 months)since the filing and thus decided it was not a good business venture afterall. However, it is something. I have to file that with the IRS. Is there anyway out of this $800?

Oh man... nope, I think you have to pay the $800 AFAIK. I would suggest using the Franchise Tax Board's live chat thing to ask the question to them--much quicker than calling!

[wonderment]

@thepinksquid,

Did you end up paying the $800 tax? I know s-corp and such are exempt from this their first year but I thought I remember reading you could apply for a credit the first year for LLC's to be exempt?

I also filed in May and I'm not too sure when the subsequent filing dates would be for next year. I wonder if it's worth incurring the penalty or not.

[thepinksquid]

Originally Posted by wonderment

@thepinksquid,

Did you end up paying the $800 tax? I know s-corp and such are exempt from this their first year but I thought I remember reading you could apply for a credit the first year for LLC's to be exempt?

I also filed in May and I'm not too sure when the subsequent filing dates would be for next year. I wonder if it's worth incurring the penalty or not.

Yup, we did have to pay up. Our first year was in 2009 but AFAIK LLCs still don't get the first year exempt like s-corps, etc.

[futbol]

I'm looking to setup an LLC to do my software work within. I won't make much money, if any. It is for work on the side of my regular job. I plan to grow it into something that might become full-time.

Nevada has been known as one of the states that is very friendly to business (corporations, LLCs, etc.), but they have recently risen their fees, both annual and initial setup. I'm now looking at setting up possibly in Wyoming, which is cheaper, and paying a company to keep a mailing address there.

I understand that if I'm working in California, and thus making money in California, I must pay taxes here. Does that mean I also have to have an LLC setup here?

[silentbob20059]

You don't have to pay the minimum tax the first year, you just have to pay the normal tax rate.

https://www.ftb.ca.gov/forms/misc/1060.pdf

P.2 - bottom, left

"Newly Incorporated or
Qualified Corporations
To compute the tax for your corporation’s first tax year,
multiply your California net income by the appropriate
tax rate.Your first tax year is not subject to the minimum
franchise tax .
After the first year, your tax is the larger of your California
net income multiplied by the appropriate tax rate or the
minimum franchise tax. "

There may also be exemptions if you're on active military duty for the taxable year.


I was seriously so upset the first time I found out about min $800 tax. This made me a lot happier.

[taxservice2u]

I am a CPA and frankly consider the 800 entity fees an awful awful awful regressive tax that drives business and employment to DE and NV. CA could raise more revenue and foster creating new small business by making this a scaled minimum tax, say 150 for entities with under 10 employees and under 1M gross revenue, X% of gross revenue for all other entities, where X is a small percentage calculated to make the tax revenue neutral given the current number of registered businesses. Having less revenue at stake would also give CA less incentive to make closing down small business entities so difficult. My opinion.

[jw2]

Originally Posted by taxservice2u

I am a CPA and frankly consider the 800 entity fees an awful awful awful regressive tax that drives business and employment to DE and NV. CA could raise more revenue and foster creating new small business by making this a scaled minimum tax, say 150 for entities with under 10 employees and under 1M gross revenue, X% of gross revenue for all other entities, where X is a small percentage calculated to make the tax revenue neutral given the current number of registered businesses. Having less revenue at stake would also give CA less incentive to make closing down small business entities so difficult. My opinion.

That is good thinking and reps to you. Did you mention this to your state senator and state assembly member?

[DMenscha]

Originally Posted by taxservice2u

I am a CPA and frankly consider the 800 entity fees an awful awful awful regressive tax that drives business and employment to DE and NV.

I could have a Delaware LLC (and even serial LLC's) and do business in CA. Tons of big businesses are incorporated in DE. Large yacht owners often incorporate or use DE LLC's to "homeport" their boats. On documented vessels you may see a DE port listed as their home port.