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the following information is provided for educational purposes only and in no way constitutes legal tax or financial advice for legal tax or financial advice specific to your business needs we encourage you to consult with a licensed attorney and/or CPA in your state the following information is copyright protected no part of this lesson may be redistributed copied modified or adapted without prior written consent of the author California has a number of ongoing requirements for your LLC to remain in compliance with the state the first of these is the statement of information which we discussed in a prior lesson remember your first statement of information is due within 90 days of the approval of your LLC then you will need to file it again every two years it will be due by the anniversary date of the approval of your LLC if you have not watched this lesson yet please do so now the next requirement is the annual LLC franchise tax of $800 California charges an eight hundred dollar annual LLC franchise tax on LLC's this tax is due by all LLC's regardless of income or the business activity this is a prepaid tax meaning that it pays for the current year your first $800 payment for the LLC franchise tax is due by the 15th day of the fourth month after your LLC is filed the month your LLC is filed counts as month one regardless if you file on the first of the month the last of the month or any day of the month really this means that if you were to file your LLC on March 22nd then you must pay the $800 fee no later than June 15th in this example March is month 1 April is month 2 May month 3 and June is month 4 then every year after your first payment your $800 LLC franchise tax will be due by April 15th you pay the $800 LLC franchise tax using form three five to two called the LLC tax voucher we've included this form below in the download section so that you can see it and get familiar with it failure to file before the deadline will result in the state charging late fees and penalties and they will eventually dissolve your LLC if you do not pay the eight hundred dollar annual LLC Franchise Tax this is not a popular requirement for California but it is mandatory and it is the cost of doing business in the state there's no way to get around this tax if you want to form an LLC in California you have to pay this 800 our tax within four months after your file l after you file your LLC and then again by April 15th of each year next is form 35 36 the estimated fee for LLC's in addition to filing and paying the 800 our annual LLC Franchise Tax you'll also have to file a return called form 35/36 estimated fee for LLC's and pay an additional fee only if your LLC will make two hundred and fifty thousand dollars or more during the tax year the more you make the higher the fee for example again if you're under $250,000 you don't have to pay this additional fee but if you're between 250 K and 500 K the fee is nine hundred dollars between 500 and a million it's $2,500 etc as you can look in the table there again the fees above are in addition to the $800 annual LLC Franchise Tax and again you only have to worry about this fee if you make over two hundred and fifty thousand dollars during the tax year form 35:36 again the estimated fee for LLC's must be filed and paid by the 15th day of the six month after your LLC has filed then every year after your first payment form 35:36 will be due by June 15th if you make less than $250,000 again you do not have to file Form 35:36 you'll be able to download form 35:36 below this video but we're going to recommend that you get help with this as it's quite complicated we'll cover more on this in just a minute next form 568 LLC return income in addition to paying eight hard ollar annual LLC franchise tax with form 35 22 do buy all LLC's and filing and paying the estimated fee for only LLC's with income over 250,000 all LLC's also need to file what's called an LLC return of income form 568 form 568 pays taxes on previous year's income just like regular federal taxes again form 568 is filed by all LLC's regardless of income form 568 is due by the 15th day of the fourth month after the end of your taxable year this will most likely be April 15th if you run your tax year January to December which and 99% of our members do think of form 568 as a summary of all the LLC's financial activity during a given tax year the purpose of filing form 568 is to report the estimated fee for your LLC report the $800 annual Franchise Tax report and pay taxes for any members who are not California residents report income deductions gains losses cost of goods sold salaries and more we're also going to recommend that you get help from an accountant with form 568 as this one is definitely confusing it's seven pages long other tax requirements and recommendations depending on your LLC's income how many members your LLC has whether or not you have employees what state the members are resident of and what type of business you have you most likely need to file additional forms besides what we have already mentioned and you may also have to pay additional taxes to the state such tax documents might be a schedule k-1 a Schedule II O a Schedule D and other documents calculating your LLC's taxes can be complicated and if done improperly can negatively impact your LLC we strongly recommend that you hire an accountant again California taxes are very complicated hiring a tax professional will not only help keep your LLC in compliance with the state but it will also give you an advisor to go to for other business questions whether your business turns a profit or loses money you still need to file tax documents every year this is not something to be taken lightly if you want to run a serious business and not get into trouble with the state you should get assistance and filing your taxes properly a referral from a friend or someone else you trust is usually the best way to find someone to do your taxes you can also ask co-workers acquaintances from local clubs or organizations your neighbors and other business people you could also ask your Twitter Facebook LinkedIn or other social media friends it's as easy as typing into your social media account hey I just formed an LLC anyone know a good accountant if you can't get a personal referral then try doing a search online for accountant or certified public accountant and looking for someone that has good reviews also take a look below this video we've included some good resources to help with your search you should also want someone who's a good fit for your company makes you feel comfortable and is willing to answer all of your questions it should be someone you like personally as well as professionally it's okay to take your time to find the right person we recommend talking with at least two to three people before making your final decision a good thing to keep in mind is that these professionals are interested in your business they'll gladly give you 10 to 15 minutes if not more of their time so don't feel pressured to go with the first person that you talk to and hey if you really want to find a rocksta
Thanks for your comment Cleta Zukof, have a nice day.
- Nathanial Munhall, Staff Member
subscribe below for more tips and tricks on how to form and successfully run your business do you have questions about the annual franchise tax is it really just 800 for your california llc i'll break down the ins and outs of the california annual franchise tax right now let's start with the definition what is the annual franchise tax it's a type of business tax required in the state of california when you're doing business and is due yearly but what qualifies you as doing business in the state of california it's when you're operating out of or have a physical presence in california having or applying for a business license in california deriving significant portions of your company's revenue from california and having employees at work in california or having to pay state payroll taxes so to clarify that business tax is the 800 all llcs must pay now here's where you might have to pay more depending on your revenue estimated llc fees let's start with an example tax time rolls around and your online bag business has made 255 000 in income this year a job well done you now owe the annual franchise tax of 800 plus an extra nine hundred dollars in additional fees the takeaway here is that the minimum you'll have to pay for the annual franchise tax is eight hundred dollars however if your llc makes over two hundred fifty thousand dollars in annual gross receipts or total revenue in the state of california you'll be required to pay an additional fee from this chart the link for the chart is in the description limited liability return of income there's one last form that you'll have to file annually as a california llc owner form 568 this is the state level tax return for your llc you'll have california specific schedules and forms attached to it for detailed information and due dates you can visit the limited liability company tax booklet or 568 booklet which is linked in the description box how should you pay for the california annual franchise tax you can pay for the annual franchise tax via web pay navigate to the state of california franchise tax board website select bank account select webpay business fill out the requested information to complete your payment for other payment methods check the description below can you get out of paying the california annual franchise tax if you're looking to avoid paying the annual california franchise tax you're out of luck this is only possible under two circumstances you could claim one of the qualified exemptions we'll cover in the next section or you dissolve your llc please note that sole proprietorships and s corporations are the only two business entities that are exempt from paying the annual franchise tax so what are qualified franchise tax exemptions the 15-day rule if you incorporate your business within 15 days of the end of the tax year but don't conduct business within those 15 days both requirements need to be met to claim this exemption then you're not required to pay the minimum franchise tax since you won't need to file a tax return no tax can be applied instead the following year will be considered your first tax year short form cancellations if you decide to dissolve your llc within one year of organizing you can file short-term cancellation form llc 4-8 with the secretary of state you will not be required to pay the 800 annual franchise tax for its first tax year first year exemption thanks to the state's 2020 budget act any california llc registered between january 1 2021 and december 31 2023 will not have to pay the annual franchise tax during its first year of business in this case your annual franchise tax will be due the following year or your second taxable year please note you should consult with a professional accountant before proceeding to claim any of the exemptions stated now that you're a california annual franchise tax pro you're ready to go be sure to check out all related videos and articles from our channel and for any questions or things you want to know be sure to drop a comment in this video learn more
Thanks ambrivasm your participation is very much appreciated
- Nathanial Munhall
About the author
I've studied sociology of agriculture at West Liberty University in West Liberty and I am an expert in classical language. I usually feel uncomfortable. My previous job was sewing machine operators I held this position for 9 years, I love talking about disc golf and sculpting. Huge fan of Hugh Hefner I practice billiards and collect trading cards.
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