I recently formed a LLC, but extenuating circumstances have made me dissolve the LLC. Because the initial tax is due within the first 4 months of the formation of the LLC, but I have not conducted any business yet of any kind, do I still need to pay the $800 tax?
Thank you for your help
Andrew Kevin JacobsonBusiness AttorneyOakland, CA ·
See the section on "To Cancel an LLC" and "Short Form Cancellation" in https://www.ftb.ca.gov/forms/misc/3556.pdf:
California LLCs can file a Form LLC-4/8 Short Form Certificate of Cancellation if all of the following are true:
1. It files the Form LLC-4/8 within 12 months after filing the Articles of Organization.
2. If does not have any debts or other liabilities.
3. It has filed or will file a timely annual LLC tax return.
4. All its assets are distributed, or no known assets were acquired.
5. It has not conducted business since the Articles were filed.
6. A majority of members or managers vote to dissolve;
7. Payments from investors, if any, have been returned.
If the form is filed, then the LLC will not be subject to the annual franchise fee of $800 (but will not be reimbursed if those in fact have been paid).
Excellent answer by Mr. Jacobson. You should also be advised that you do not owe taxes on an LLC; the LLC does. Since it is a limited liability entity, the owners are not liable for its debts such as taxes, unless the owners took a distribution of assets at a time when the LLC was insolvent, or which made it insolvent.
The following is from the FTB web site:
In general, LLCs are required to pay the $800 annual tax and file a California return until the appropriate papers are filed. In order to cancel an LLC, the following steps must be taken:
1. File a timely final California return (Form 568) with the FTB and pay the $800 annual tax for the taxable year of the final return.
2. File Form LLC-4/7, Certificate of Cancellation, with the California SOS. The California SOS also requires a domestic LLC to file Form LLC‑3, Certificate of Dissolution. Contact the California SOS for more details.
The Form LLC-4/7’s effective date will stop the assessment of the $800 annual tax for future taxable years. If Form LLC-4/7 is filed after the taxable year ending date, a subsequent year return and an additional $800 tax may be required.
For taxable years beginning on or after January 1, 2006, the annual tax will not be assessed if the LLC meets all of the following requirements:
• The LLC files a timely Final Limited Liability Company Return of Income, for the preceding taxable year, including extension.
• The LLC did not do business in California after the final taxable year.
• The LLC files the appropriate documents for cancellation with the California SOS within 12 months of the timely filed Final Limited Liability Company Return of Income.
Short Form Cancellation
Beginning January 1, 2005, domestic LLCs organized in California on or after January 1, 2004, can file a Limited Liability Company Short Form Certificate of Cancellation (Form LLC-4/8) if the following requirements are met:
• Form LLC-4/8 is being filed within 12 months from the date the Articles of Organization were filed with the SOS.
• The domestic LLC has no debts or other liabilities (other than tax liability).
• The known assets have been distributed to the persons entitled thereto or no known assets have been acquired.
• The final tax return or a final annual tax return has been or will be filed with the FTB.
• The domestic LLC has not conducted any business from the time of the filing of the Articles of Organization.
• A majority of the managers or members, or if there are no managers or members, the person or a majority of the persons who signed the Articles of Organization, voted to dissolve the domestic LLC.
• If the domestic LLC received payments for interests from investors, those payments have been returned to those investors.
The LLC must file SOS Form LLC-4/8, with the SOS. The LLC must include a statement that all of the items above have been completed before the California SOS will cancel the LLC.
