To avoid back-to-back California Franchise Tax payments, include a “future file date” on your articles of organization or incorporation when you file. People who set up a limited liability company or partnership in California won’t have to pay the annual $800 minimum tax levied on business entities their first year, under the budget bill signed by Gov. Gavin Newsom, but the waiver applies only to those formed from 2021 through 2023.
Forming an LLC Later in the Year
The best way to avoid paying back-to-back $800 franchise tax is to not let your California LLC go into existence at the end of the year. For example, if you’re forming your LLC later in the year (October, November, or December), and you don’t need your LLC open right away, you can use a future file date and make your LLC effective January of the following year.
Dissolution to Avoid Franchise Tax
In very limited circumstances, newly formed California LLCs that plan to dissolve can avoid the $800 Franchise Tax. Normally, when a domestic LLC ceases to do business in California, the Managers of the company will file a Certificate of Dissolution (LLC-3) and a Certificate of Cancellation (LLC-4/7) with the Secretary of State to officially end the existence of the company if the final tax return has been or will be filed with the Franchise Tax Board; the domestic LLC has not conducted any business from the time of filing the Articles of Organization; a Majority of the Managers or Members voted to dissolve the entity.
Annual Franchise Tax for LLCs
Yes, California charges your business an Annual LLC Franchise Tax of $800. It is filed with Form 3522 (LLC Tax Voucher). The Franchise Tax must be paid by all California LLCs regardless of how much they earn. You must submit your first Form 3522 by the 15th day of the 4th month after you filed your LLC. After that, you’ll have to submit Form 3522 by April 15th every year.
Avoiding the $1,600 franchise tax: If you’re forming your CA LLC later in the year (October through December), you’ll end up owing two $800 payments to the state within a few months. You can avoid this by using a future file date (making your LLC go into existence in January).
How LLC Fees are Calculated
The Estimated Fee for LLCs only applies to LLCs that make $250,000 or more during a taxable year. This is filed on Form 3536 and is calculated based on your California LLC’s gross receipts (total revenue).
Every LLC registered to do business in California must pay an $800 annual fee called the Franchise Tax. The payment is expected by the fifteenth day of the fourth month after the finish of your LLC’s fiscal year..isnan