California Resident with Out of State LLC. Do I Need Form 568?

4 Replies

Hi BP!

I am a California resident and I have an LLC in Indiana for my rental properties where I am the only member. This is my first year having an LLC and filing out of state. I was wondering if I need form 568 for tax purpose when I file in California?

Thank you!

You will need to determine if you are considered as doing business in California. The scope of the law will often capture out of state LLCs since the threshold for doing business in California is incredibly low (for the obvious revenue generating reason).

Be prepared to file unless your activities are unusually limited.


@Isaac Harjono

As @Christopher Smith noted, California paints with an extremely broad brush regarding what it deems to be "doing business" in California.

If you are a California resident and managing-member of the LLC, the LLC will almost certainly have a California Form 568 filing obligation even if it is organized in another state and has no California source sales, property, or payroll. You should be prepared to pay the $800 annual California LLC tax.

@Isaac Harjono

California is a sort of beastly state when it comes to taxes and filings. Even if you create a non-CA LLC, if you are managing the business from California, you will likely be deemed to be "doing business" in California and therefore likely subject to CA taxes. California charges a minimum tax of $800 a year per LLC, and more if you have gross receipts in excess of $250k. So, if you create an LLC in another state, you will need to register it as a foreign LLC in California. Though, this process will be the same for the other state (if you created a CA LLC you will need to register it as a foreign LLC in the state in which you are doing business/holding property). This means that you will need to pay registration and filing fees in at least 2 states if you don't buy CA property.

Here are a couple articles about the subject:

https://www.realestatelanduseandenvironmentallaw.com/is-your-out-of-state-llc-doing-business-in-california.html

https://www.biggerpockets.com/forums/51/topics/267604-yes-californians-you-have-to-register-your-non-ca-llc-with-ca

*This post is informational only and is not to be relied upon. Readers are advised to seek professional advice. This post does not create an attorney-client or CPA-client relationship.

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