Q: Is a non-California LLC making just passive (interest) income in California liable for California income tax?
I am a Texas resident who lives in Tijuana, Mexico. I am the manager and sole member of a single-member Wyoming LLC that only makes passive (interest) income from a loan and bank account interest in the state of California. Is my LLC subject to California income tax on this income? I have not filed California state income tax returns, but the state has sent me notices demanding tax returns.
A: California considers you to be “doing business” if you meet any of the following:
Engage in any transaction for the purpose of financial gain within California
Are organized or commercially domiciled in California
Your California sales, property or payroll exceed specific amounts
Since you're making money off of a California resident they consider you to be doing business in California. The Franchise Tax Board is very aggressive and they often claim that they are owed tax when they're not so it's probably worth hiring a pro to do an analysis and see; or just run the return and see how much you owe.
Justia Ask a Lawyer is a forum for consumers to get answers to basic legal questions. Any information sent through Justia Ask a Lawyer is not secure and is done so on a non-confidential basis only.
The use of this website to ask questions or receive answers does not create an attorney–client relationship between you and Justia, or between you and any attorney who receives your information or responds to your questions, nor is it intended to create such a relationship. Additionally, no responses on this forum constitute legal advice, which must be tailored to the specific circumstances of each case. You should not act upon information provided in Justia Ask a Lawyer without seeking professional counsel from an attorney admitted or authorized to practice in your jurisdiction. Justia assumes no responsibility to any person who relies on information contained on or received through this site and disclaims all liability in respect to such information.
Justia cannot guarantee that the information on this website (including any legal information provided by an attorney through this service) is accurate, complete, or up-to-date. While we intend to make every attempt to keep the information on this site current, the owners of and contributors to this site make no claims, promises or guarantees about the accuracy, completeness or adequacy of the information contained in or linked to from this site.