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Both LLC's and C-Corps exempt from California $800 Franchise Tax the 1st year?
Anonymous5 views3 answers
I'm looking to form an LLC in California very soon.
I'm told that companies are exempt from California's $800 Franchise Tax the 1st year. I researched this on the Internet and found people both saying companies ARE exempt and AREN'T exempt. I also gleaned that maybe C-Corp's are exempt but LLC's aren't.
What are the current facts on this?
If you're able to cite 1st hand sources it would be helpful.
Thank you so much!
In Calfornia, a Limited Liability Company (LLC)'s first annual LLC tax payment is due on the 15th day of the 4th month after the filing date.
Each year's subsequent filing is due on the 15th day of the 4th month of the end of the tax year, or April 15th for calendar year filing.
So, for example, if you filed a new LLC on November 10th, the following year you would owe $800 on March 15th and another $800 on April 15th.
The LLC must pay the minimum franchise tax to the California Franchise Tax Board, even if it is non-operational. California has a minimum franchise tax of $800 on all LLCs that are taxed as partnerships (i.e. pass through taxation). This applies to foreign and domestic California LLCs.
See:
This is becoming an urban myth. The history is that around Y2K California tried to become business friendly and offered a moratorium on the minimum tax on LLCs for the first year. That exemption was abolished after a couple of years and was never restored. So you will owe the $800 in the first year.
Taxation of C corps is covered on p. 6 in Instructions for Form 100 of the FTB. Go to
http://www.ftb.ca.gov/forms/2010/10_100bk.pdf. No minimum franchise tax is due for the first year; however, a tax is due for the first year computed on its net income at its tax rate, generally equal to 8.84%. The minimum is due in the second year and thereafter.
