CA form 568 for SMLLC with no activity?

Question

Hi BP,

I have a single member LLC in Indiana with no property or income in CA, but still have to pay the $800 tax since I'm the managing member living in CA. The LLC only owns 1 rental property and cash flow is pretty minimal, so this $800 tax hurts a lot more. I'm thinking about deeding the property out of the LLC into my personal name to avoid the CA tax. I'd like to keep the LLC open though just in case I need it for something in the future.

My question is, if I keep the LLC open, do I still have to file form 568 and pay the CA tax even if the LLC has no income or expenses?

Namit S. · Answer

Hahaha! Thanks for the response @Kevin Luttrell

I did something similar wrt deeding the property, however, still had the LLC active for a few years before I wound it down so need to figure out what to do about the filing.

BTW, get an Umbrella Insurance if you haven't done so already now that the LLC isn't there to protect your personal assets.

Kevin Luttrell · Answer

@Namit S. I ended up just deeding the property to my personal name and closing the LLC. Wasn't worth the extra $800/yr expense and I couldn't get a concrete answer on whether or not CA would require payment of business tax for a completely inactive out-of-state LLC, so I closed it.

Next I am planning to escape CA and move away. Lol

Namit S. · Answer

@Kevin Luttrell - my response might be a bit too late, but I am in the same predicament as you and according to my research the answer is yes.

What did you end up doing?

I am currently looking for a completed form 568 to understand how to populate the form for the year that I had no income / expenses + the next year where I had income / expenses and filed a Schedule E for federal taxes. Any help in this area would be greatly appreciated!

Kevin Luttrell · Answer

I use Chase for banking and I live in CA and operate the business from CA, so I know I'm normally responsible for the CA $800 business tax. Thanks for sending that article though, I didn't know the tax is waived the 1st year the company is in business! My CPA didn't know either, passing this info on to him.

Are there any tax professionals here who can confirm if the form 568 and CA franchise tax are still required, even if I have a single member LLC in another state with no income or expenses?

Kevin Sobilo · Answer

I did a quick reading about this.

I suspect that you don't need to pay that tax, but you may need to make all of you business transactions outside of CA. So, I would use a bank in Indiana for all business accounts etc.

I would check with a local CPA or lawyer to confirm, but that is my reading of things.

https://www.californiaregister...