fees to start an llc in california [Solved]



Last updated : Aug 27, 2022
Written by : Jimmie Keeth
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fees to start an llc in california

Do you have to pay the $800 California LLC fee the first year 2021?

California law generally imposes a minimum franchise tax of $800 on every corporation incorporated, qualified to transact business, or doing business in California. A corporation that incorporates or qualifies to do business in California is exempt from paying the minimum franchise tax in its first taxable year.

Why is California LLC fee so high?

Every business pays the $800 annual franchise tax, which is applied to taxes owed, but LLCs are the only ones subject to California Gross Receipts tax. This is one of the biggest reasons why a California LLC is so expensive.

How can I avoid $800 franchise tax?

Thus, the only way to avoid the tax is to dissolve the company. Additionally, another important detail to note is that if you change your business structure during the year–for instance, from an LLC to a C corporation–you would then be subject to the minimum franchise tax on both entities for that year.

Do you have to pay the $800 California LLC fee the first year 2022?

Under the new rules, for the period starting January 1, 2021 and ending December 31, 2023, any LLC, LP, or LLP that files, registers, or organizes to do business in California is exempt from the state's $800 minimum annual franchise tax for its first taxable year.

Is LLC worth it in California?

Is LLC Worth It in California? Having an LLC in California offers liability protection, which is worth the additional costs. In addition, an LLC protects all of your assets should your business get sued or be unable to pay its debts.

What is the 10% LLC fee penalty?

LLCs will use form FTB 3536, Estimated Fee for LLCs, to remit the estimated fee payment. A penalty will apply if the LLC's estimated fee payment is less than the fee owed for the taxable year. The penalty is equal to 10% of the amount of the LLC fee owed for the year over the amount of the timely estimated fee payment.

How do I start an LLC in California for free?

To form an LLC in California, go to bizfileOnline.sos.ca.gov, log in, select Register a Business under the Business Entities Tile, Articles of Organization - CA LLC and follow the prompts to complete and submit.

How do I avoid paying LLC taxes in California?

Can I avoid the California Franchise Tax? There's no way for a registered business to legitimately avoid the California Franchise Tax. Sole proprietors and general partnerships don't have to pay the California Franchise Tax, but they also don't have any personal liability protection.

What is the downside to an LLC?

Disadvantages of creating an LLC States charge an initial formation fee. Many states also impose ongoing fees, such as annual report and/or franchise tax fees. Check with your Secretary of State's office. Transferable ownership. Ownership in an LLC is often harder to transfer than with a corporation.

Is CA LLC fee based on income?

LLC Fee. LLCs are subject to an annual fee based on their total income "from all sources derived from or attributable to California" (R&TC Section 17942).

Is California waiving the LLC fee?

This waiver will last until June 30, 2023, the end of the state's current fiscal year. Here is the Secretary of State's list of filings for which no filing fee is currently being imposed: Articles of Organization - CA LLC. Registration - Out-of-State LLC.

Can LLC Get tax Refund?

Do LLCs get tax refunds? Generally, no. However, LLCs can elect to be treated like C corporations for tax purposes by filing Form 8832. If an LLC elects C corporation status and makes quarterly estimated payments higher than its tax liability for the year, the LLC can receive a tax refund.

How long is an LLC good for in California?

You'll need to file your first Statement of Information within 90 days after the state approves your California LLC. Afterwards, you must submit it once every 2 years to keep your business in good standing.

How long does it take for an LLC to be approved in California?

Mail filings: In total, mail filing approvals for California LLCs take 2-3 weeks. This accounts for the 3-5 business day processing time, plus the time your documents are in the mail. Online filings: In total, online filing approvals for California LLCs take 3-5 business days.

How much can an LLC write off?

If you have $50,000 or less in startup costs and are in your first year of business, the IRS allows you to deduct $5,000 in startup costs and $5,000 in organization costs from your taxes. If your startup expenses exceed $50,000, the total deduction will be reduced by however much your expenses exceed $50,000.

Is the $900 LLC fee deductible for California?

The additional $800 annual Franchise Tax and potential gross receipts tax on LLCs make doing business in California a little more expensive than doing business in almost any other state. But the costs to form and maintain your California LLC are deductible on your federal income tax, so you can find some savings!

How do I pay the $800 franchise tax?

The state requires corporations to pay either $800 or the corporation's net income multiplied by its applicable corporate tax rate, whichever is larger. You may pay the tax online, by mail, or in person at the California Franchise Tax Board Field Offices.

Is there anything better than an LLC?

Corporations offer more flexibility when it comes to their excess profits. Whereas all income in an LLC flows through to the members, an S corporation is allowed to pass income and losses to its shareholders, who report taxes on an individual tax return at ordinary levels.

What are the 2 main advantages of having an LLC?

  • Limited liability. Members aren't personally liable for actions of the company.
  • Management flexibility.
  • Easy startup and upkeep.
  • Limited liability has limits.
  • Self-employment tax.
  • Consequences of member turnover.

What state has the cheapest LLC filing fee?

Kentucky has the lowest LLC formation cost at $40 per LLC while Massachusetts is the most expensive at $500 per LLC.


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fees to start an llc in california


Comment by Britta Magnall

do I have to pay California's $800 franchise fee for my LLC Amanda here from the business finance coach where I'm simplifying accounting taxes and business planning if this sounds like something you're interested in you can subscribe to my youtube channel while still watching this video by clicking the watermark in the bottom right corner of your screen back to the California Franchise Tax fee of $800 so do you really have to pay this fee you can see the state web site behind me you just search ftb.ca.gov and you can just search FTB $800 LLC California and up will come the links for this site it does sound a little confusing as you'll see in this graph here where they talk about the annual California fee and then they talk about incomes greater than two hundred and fifty thousand dollars now just to verify I actually called and spoke to the state and part of why this is confusing is because there's two fees or taxes that apply to your LLC if you have an LLC in the state you have to pay the $800 franchise tax fee every year everyone really pays the $800 fee for any LLC formed in the state the second aspect is if you have an annual LLC fee which is in addition to that $800 fee which you pay every year as long as the income is less than 250,000 in your business you don't have to worry about an additional tax but once your gross income sales goes above 250,000 then you will have an additional tax to pay to the state of California the next thing I want to show you is the amount of that additional tax here we are in the instructions and this is where you'll see the amounts of the second feed two hundred fifty thousand to four hundred and ninety nine nine nine nine a dollar short of five hundred thousand pay $900 five hundred to a million right before million pay twenty five hundred dollars a million to almost five million pay six thousand dollars and then the next bracket over five million pay eleven thousand seven ninety like many things taxes you know it's like the person making 1 million is paying the same as the person making four point five million so you know is it fair I don't know but regardless this is the tax for California and then you can see that they give a an example down here and they go through for each business the annual tax which is that eight hundred dollar fee plus the LLC fee so the annual tax is eight hundred and the LLC fee is based on if you earn more than two hundred fifty thousand and your income and so I know that that's a little confusing I'd love to hear any questions you have in the comments below if you enjoyed this video let me know otherwise subscribe I'll see you next time have a beautiful day bye


Thanks for your comment Britta Magnall, have a nice day.
- Jimmie Keeth, Staff Member


Comment by Gordon

hey this is attorney elizabeth weinstein and today we're going to talk about how much money does it really take to start an llc in california so an llc or a limited liability company is not something that you're required to do when you start a business but a lot of people will form an llc to protect their personal assets from the liability of the business sometimes for tax reasons and sometimes because you may be hired by companies who require you to be an llc or corporation because they don't want to be accused of having an accidental employee and owing employment taxes on your earnings but like anything else we do in business forming an llc costs money so what's the minimal amount of money you will have to spend to start your llc and by the way i'm talking about doing it yourself not hiring a lawyer not using legalzoom or some other service but the minimum requirements it takes for all the kind of government filing fees to form your llc in california it's going to cost 70 just to file the forms with the state of california online you also may decide to get a certified copy of what you file which is a good idea so you can use that to open up your bank account and stuff like that and that's an extra five dollars as of the time that i am recording this video the next required expense is going to be a franchise fee this is like an annual tax that's not called a tax it's called the franchise fee that you have to pay for any llc or corporation in california either because you formed in california or you're an out of state business that has an office or some location in california such that you're legally located here or have an office here have a nexus here that annual fee is eight hundred dollars a year minimum it's more if you're making tons of money but if you're starting a brand new business you're probably not in that category yet now there are special rules for s-corporations that you only have to pay for a portion of the year but here's the thing that doesn't necessarily apply to an llc unless you're taxed as an ex-corporation and that gets into details beyond the scope of this video but just assume that you're gonna have to pay that 800 for the calendar year no matter when you file your llc so if you create it in january it's from january december but if you create it in december you have to file the 800 for the whole year so you want to be aware of this issue think about when you're filing when you're creating your llc and see if that rule applies to you specifically the last required filing that you're going to need to do with the state of california is a statement of information this is as of right now a 20 filing fee if you do it online and it's just telling them things like here's your physical address here's your mailing address here are the different members of the llc or the officers of the llc and their locations what your registered agent is which is probably the same register agent as you had on your original form you have to file that in the beginning within 90 days i think of when you create your llc it's best just to do at the same time and then you have to file it every couple years after corporations have to file more often than llcs so those required fees for your first year are almost 900 dollars the second thing we're going to talk about are fees that you're probably going to have to do so the first category is a business license you may or may not need a business license because it depends upon exactly where you're located and the kind of business that you have so if you're in san jose california if you're in the city of los angeles every single business there has to get a general business license which they actually kind of call a tax registration same thing and the fee depends upon the kind of business you have how much money you're making how many employees you have all that kind of stuff depending upon where you are i would budget like 200 a year for that when you start out and you're you have a you know simple one-person business and then it'll go up from there depending upon the complexity of your business occasionally you don't need a business license if you're in an unincorporated area in a rural area sometimes you don't need one so it's something that you're going to have to look into for your particular location the next item you'll probably have to do but maybe not is a dba a doing business as registration in california those are done at the county level so you do a county filing and then you have to publish that information in a newspaper usually a special legal newspaper so those exact requirements are different from county to county so you need to see what they are in your particular location and it only applies if the business name like your trade name that you use on your website in your marketing is a different name than the legal name the llc name you may use the same name so you don't need to do a dba or you may need to do that the third category are things that are a very good idea to set up for your business we're talking about bookkeeping now you can do free bookkeeping where you just have a spreadsheet and you just write down your income and expenses there but you may want to sign up for some kind of service like quickbooks online or xero there's a whole bunch of different ones some of them are there are ones that are free some of them are like seven dollars a month some of them the minimum is 25 a month so you want to budget 100 200 300 a year for your bookkeeping and that's if you do it yourself the second thing that you're probably going to want to set up is taxes so every year you're going to file a tax return for your llc the llc may be taxed as a pass-through entity where you're personally paying taxes on the money it distributed to you but the llc still has to file a tax return sometimes with the state sometimes if you're an s corporation if your llc taxed as an s corporation you'll have to file an s-corporation tax return if you're an llc text as a partnership you have to file partnership tax return okay it can get very complicated and you need to look into whether or not you're going to be able to handle that yourself or if you need to hire someone to do that if you're an llc that is a one-owner business and use a pass-through tax entity so it's just on your schedule c you could use turbotax for that but they don't have a turbo tax for s corporations okay so and then i'll mature tax for partnerships so if you have a more complicated tax situation you're probably going to want to hire someone to do that and that could be 500 a year a thousand dollars a year it really depends upon your location the last aspect is you want to make sure your llc is fully capitalized what does that mean it means that it needs to have enough money sitting inside of it to keep operations continuously going on how much money that is really depends upon the kind of business you have it may be a couple hundred bucks if you have a really simple service-based business it may be thousands of dollars maybe tens of thousands of dollars that needs to be sitting in that bank account it depends upon whether or n


Thanks Gordon your participation is very much appreciated
- Jimmie Keeth


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