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Should I pay the $800 taxes for a dissolved LLC that only lasted a few months?
Anonymous5 views5 answers
I formed an LLC on Feb 21, 2012.
It was for a podcast that makes zero money. I created the LLC to protect my personal finances. When I saw the $800 tax bill I decided to dissolve it.
It was dissolved by Jul 3, 2012.
Should I pay the $800? It's probably late at this point. Thanks!
You do not have personal liability for the Franchise Tax Deposit. The obligation is that of the LLC. Unless you agreed to assume the LLC liabilities incident to it's dissolution, you are not responsible to pay the Deposit. You should discuss the matter with a business attorney in your area.
Curtis Lamar Harrington JrTax LawyerLong Beach, CA ·
Read the Ralite Case, linked below.
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Curt Harrington
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Peyton Hunley RobinsonTax LawyerSalt Lake City, UT ·
If you are legally liable to for taxes, then yes, you should pay the bill. If you fail to pay it, the taxing authority can come after you to collect it. Does the LLC somehow remove your liability for the tax?
Under federal law, the LLC form is taxed as a corporation, partnership, or sole proprietor, depending on elections and number of members. From what you describe, I am guessing it was a single member LLC and by default you would be taxed as a sole proprietor. The LLC would be disregarded for tax purposes, making you liable for the taxes of the LLC. You may want to consult IRS Publication 3402, Taxation of Limited Liability Companies (at http://www.irs.gov).
However, I could be missing something. I am not a California attorney, and beyond the IRS publication, it may be best to consult a local accountant or tax attorney to talk over your situation. For you to form a company, make no money, but owe $800 in taxes really leaves open several critical questions. For example, what kind of taxes (income, excise, sales?), by zero money do you mean you just spent more than you made, was the LLC single member, did you file any tax elections with the LLC, and how did you find out you owe $800 (who billed you)? There may be ways to approach your potential liability that would resolve it by meeting with someone locally to go over your facts more closely. But without knowing more, yes, you should pay the bill.
For my 35 years of practice it has been the practice of the California Franchise Tax Board to not pursue the shareholders of an entity for the minimum franchise tax. Could the FTB take a different approach in the future? Yes. Would the FTB prevail in court if it changed its approach? That would depend upon the facts.
However, unless the FTB changes its approach, you have no personal liability for the unpaid franchise tax and, therefore, do not need to pay it.
If you filed the California SOS Form LLC-4/8 (Short Form Cancellation) within 12 months after filing your Articles of Organization (per your fact pattern, you filed to dissolve within 5 months), the LLC will not be subject to the annual $800 tax for its first tax year. See FTB 2556 LLC MEO. You need to meet all of the requirements in Form LLC-4/8 and the California Secretary of State needs to approve the cancellation. You should check back with the California Secretary of State online to see if/when your LLC is cancelled.
