Q: Do I have to pay the CA franchise and file annual income tax for a newly formed single member LLC with no income?
I created a new LLC last July and I'm the only member.
So far the LLC has not been operative and has generated no revenue.
Do I need to file an income Tax return or pay the $800 California Franchisee tax?
A: Unfortunately , yes, you have to pay that franchise tax regardless of whether your LLC is active or inactive. So long as the LLC is in existence, you must pay the annual tax. Some people make the mistake of only paying the tax when they earn an income, which causes the LLC to go into "FTB Suspended" status, which means that the LLC may not transact business until all back taxes are paid. It is much better to dissolve the LLC and re-create a new LLC once you want to transact business if you do not plan to use the LLC any time soon.
Your LLC must pay the annual franchise fee of $800, file federal and state taxes, as well as quarterlies.
Failure to fulfill your obligation will result in interest and penalties, interest on penalties, and penalties on interest. It is a good idea to get a book keeper to fulfill the filing requirements.
If it seems your business adventure is not likely to be successful, you might conclude your LLC's relationship with the IRS and FTB as soon as possible to avoid further fees and filings.
This posting does not create any attorney-client relationship. The information presented here is general in nature and is not intended nor should be construed as legal advice for any particular case or client. For specific advice about your particular situation, please consult with your own attorney. This posting is not intended to constitute an advertisement or a solicitation.
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.