The $800 California LLC Tax and California LLC Fee: A CPA Answers All!Small Business Taxes
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As a California CPA, I see a lot of new business owners or investors who are confused about the $800 California LLC tax and the California LLC fee based on gross receipts.
Well, I hope to answer all of your California LLC questions in one place. Note that all of the information regarding California LLCs below assumes that the LLC has not elected to be taxed as a corporation.
Nothing in this article is to be taken as tax advice. It is all strictly informational.
What Is the California LLC Tax?
The California LLC tax is the dreaded $800 payment owed by California LLCs to the Franchise Tax Board (California’s version of the IRS) every year for the privilege of doing business in California.
What If My LLC Didn’t Make Any Money?
Even if your California LLC didn’t make any money, it still owes this tax to the FTB every year.
Is There Any Exception to the Rule?
Yes, there is one exception. If your LLC’s taxable year is 15 days or less and it did not do business in California during the 15-day-or-less period, then your LLC is not subject to the $800 California LLC tax.
When Is the California LLC Tax Due?
The California LLC tax is due by the 15th day of the 4th month after the beginning of the taxable year.
So if you formed your LLC in June, your initial $800 LLC tax would be due by September 15 of that same year.
For subsequent years, if your LLC’s taxable year begins on January 1 (as most do), the due date for the LLC tax would be April 15 of that same year.
Who Owes the California LLC Fee?
The California LLC fee is an amount owed in varying amounts by California LLCs with California gross receipts of $250,000 or more.
The LLC fee is in addition to the $800 LLC tax.
Here is a list of California gross receipt amounts and the amount of LLC fee owed:
|If Gross Receipts Are:||Then Your LLC Fee Is:|
|Between $250,000 and $499,000||$900|
|Between $500,000 and $999,999||$2,500|
|Between $1,000,000 and $4,999,999||$6,000|
|$5,000,000 and Over||$11,790|
Yup, gross receipts…no deductions here!
If you sell widgets, this is your gross sales.
But remember, the LLC fee is assessed only on California gross receipts, not gross receipts earned in other states. See the example below.
My LLC Had $300k of California Receipts and $300k of Non-California Receipts. What’s My LLC Fee?
Because the California LLC fee is only on California gross receipts (for example, rents on California properties), your LLC fee would be $900.
What If I Have a Parent LLC – Child LLC Structure? Are Both Subject to the Fee?
No. The fee is not leveled on the same gross receipts twice.
The lowest-level LLC with California gross receipts is responsible for the fee.
So if you have, say, three child LLCs each owning California rental properties, and these three child LLCs are owned by a holding parent LLC, only the child LLCs would be subject to the LLC fee.
When Is the California LLC Fee Due?
The California LLC tax is due by the 15th day of the 6th month after the beginning of the taxable year.
So if you formed your LLC in June, your LLC fee would be due by November 15 of that same year.
For subsequent years, if your LLC’s taxable year begins on January 1 (as most do), the due date for the LLC tax would be June 15 of that same year.
I Live in California. Does My Out-of-State LLC Have to Pay the LLC Tax or Fee?
Whether or not your out-of-state (“foreign”) LLC is subject to California taxation depends on 1) whether or not it is registered in California and 2) whether or not it is doing business in California.
If your foreign LLC is registered in California, it is subject to the $800 LLC tax and must pay the LLC fee to the extent that it has California-sourced income.
If your foreign LLC is not registered in California, the issue is whether or not the LLC is doing business in California.
Doing Business in California
The mere fact that a California resident is a member of the LLC does not necessarily mean that the LLC is doing business in California.
However, if you while residing in California, perform in any capacity on behalf of the LLC, the FTB says that this LLC is deemed to be doing business in California and would subject to the $800 LLC tax and LLC fee.
However, if you are truly a mere passive investor with, say, a partner who lives in Georgia (for example) and manages the Georgia properties owned by the Georgia LLC, the Georgia LLC is not considered to be doing business in California and is not subject to the $800 and tax filing.
There are a handful of states where residency of a member/partner will trigger a filing requirement for an LLC or limited partnership, but California isn’t one of them.
Foreign Parent-Child LLCs
If a foreign child LLC were doing business in California, then its foreign parent LLC would be subject to the LLC tax and fee, but not necessarily the other way around.
Logan is a practicing CPA, Certified Student Loan Professional, and founder of Money Done Right, which he launched in July 2017. After spending nearly a decade in the corporate world helping big businesses save money, he launched his blog with the goal of helping everyday Americans earn, save, and invest more money. Learn more about Logan.