California LLC taxes explained

7 Replies

Hi

I have formed an LLC in California. I did this because I will need an LLC to be able to get a loan from my HM lender. Filing date was July 14th 2016, but so far I have not done anything with it. I am the only member, so it is a disregarded single member LLC. When exactly do I have to pay what taxes or fill out what forms?

I just got a letter from the California Franchise Tax Board stating that I have to

  1. Pay $800 annual tax by the 15th day of the 4th month - I think I am already too late for this? Should I have payed this before Oct 15th?
  2. Estimate and pay the annual fee - Since I have not done anything with my LLC yet, I think I don't have to do this?
  3. File form 568 - Do I have to do this even though it is a disregarded single member LLC?

When exactly do I have to do what in the first year and the following years? If I am already too late for the $800 annual tax, are they going to fine me if I pay that now?

Sorry, this might seem very basic questions. I just feel a bit overwhelmed with this official government english...

Thanks Simon

Hi @Simon Stahl , I am a California CPA specializing in real estate and have handled the tax filings for hundreds of CA single-member LLCs for real estate investors.  I have answered your questions below.

  1. Pay $800 annual tax by the 15th day of the 4th month - I think I am already too late for this? Should I have payed this before Oct 15th?  Yes, you should have, and you should pay it immediately.  You can either use Form 3522 or pay online.
  2. Estimate and pay the annual fee - Since I have not done anything with my LLC yet, I think I don't have to do this? That is correct. The LLC only has to pay the annual fee when it hits $250,000 of California gross receipts.
  3. File form 568 - Do I have to do this even though it is a disregarded single member LLC  Yes, you do. Your Form 568 for the period 7/14/16 - 12/31/16 will be due April 17, 2017. However, because this is a single-member LLC, not every page of the Form 568 has to be completed (there are some exceptions to this rule, but based on your LLC's level of activity, they do not apply to your LLC).

Feel free to connect and private message me with any further questions you may have.

Thanks a lot @Logan Allec That helps a lot. 

Just wondering: once I start actually using my LLC, what is a ballpark cost to hire you or any other CPA to handle all the paperwork? Let's assume the LLC would hold 2 or 3 rental properties and do a couple flips a year.

If your books are clean, I would charge $400 for a 568 for a single-member LLC with that level of activity, $300 if I also prepare your personal tax returns (which would cost a bit more). However, you should pay the $800 LLC Tax for 2016 now yourself.

Sorry, I got one last question @Logan Allec : Would you recommend using the calendar year or a fiscal year that ends one year after I filed for the LLC? Calendar year seems easier to keep track of, but with the fiscal year, I would safe half a year of taxes...

Never mind, I just figured it out myself. Disregarded single member LLCs can only use the calendar year. 

Thanks a lot for you info @Logan Allec , it is much appreciated!

Question, as Self Directed IRA LLC (disregarded entity) Do I only report Gross Income on CA 568 Schedule IW but what is Cost of Goods Sold? I sold one home under SDIRA LLC during 2016 and if I report cost of good sold then I owe a lot more than the min. annual fee of $800. I have already paid 800 estimated tax but now do I need to pay another 2500 even if I am managing the SDIRA LLC?

Originally posted by @Simon Stahl :

When exactly do I have to do what in the first year and the following years? If I am already too late for the $800 annual tax, are they going to fine me if I pay that now?

Sorry, this might seem very basic questions. I just feel a bit overwhelmed with this official government english...

Thanks Simon

 @Simon Stahl

The yearly LLC fees in California may sting a bit compared to some of the other states; that department however is somewhat responsive and a few years ago had representatives available for live online chat with the public directly from the department website. You may want to contact them directly.

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