California LLC - Annual LLC Franchise Tax - YouTube

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legal, tax, or financial advice.

For legal, tax, or financial advice specific to your business needs, we encourage you to

consult with a licensed attorney and/or CPA in your State.

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California has a number of ongoing requirements for your LLC to remain in compliance with

the State.

The first of these is the Statement of Information which we discussed in a prior lesson.

Remember your first Statement of Information is due within 90 days of the approval of your

LLC.

Then, you'll need to file it again every two years.

It will be due by the anniversary date of the approval of your LLC.

If you have not watched this lesson yet, please do so now.

The next requirement is the Annual LLC Franchise Tax of $800.

California charges an $800 Annual LLC Franchise Tax on LLCs.

This tax is due by all LLCs regardless of income or the business activity.

This is a "prepay tax", meaning that it pays for the current year.

Your first $800 payment for the LLC Franchise Tax is due by 15th day of the 4th month after

your LLC is filed.

The month your LLC is filed counts as Month 1, regardless if you file on the 1st of the

month, the last of the month, or any day of the month, really.

This means that if you were to file your LLC on March 22nd, then you must pay the $800

fee no later than June 15th (in this example, March is Month 1, April is Month 2, May is

Month 3, and June is Month 4).

Then, every year after your first payment $800 LLC Franchise Tax will be due by April

15th.

You pay the $800 LLC Franchise Tax using Form 3522 called the LLC Tax Voucher.

We've included this form below in the download section, so that you can see it and get familiar

with it.

Failure to file before the deadline will result in the State charging late fees and penalties,

and they will eventually dissolve your LLC if you do not pay the $800 Annual LLC Franchise

Tax.

This is not a popular requirement for California, but it is mandatory and it is the cost of

doing business in the State.

There's no way to get around this tax.

If you want to form an LLC in California, you have to pay this $800 tax within 4 months

after you file your LLC and then again by April 15th of each year.

Next is Form 3536, the Estimated Fee for LLCs.

In addition to filing and paying the $800 Annual LLC Franchise Tax, you'll also have

to file a return called Form 3536, Estimated Fee for LLCs, and pay an additional fee only

if your LLC will make $250,000 or more during the tax year.

The more you make, the higher the fee.

For example, again if you're under $250,000 you don't have to pay this additional fee,

but if you're between $250,000 - $500,000, the fee is $900.

Between $500,000 and a million it’s $2,500, etcetera as you can look at the table there.

Again, the fees above are in addition to the $800 Annual LLC Franchise Tax, and again you'll

only have to worry about this fee if you make over $250,000 during the tax year.

Form 3536, again the Estimated Fee for LLCs must be filed and paid by the 15th day of

the 6th month after your LLC is filed.

Then, every year after your first payment, Form 3536 will be due by June 15th.

If you make less than $250,000, again, you do not have to file form 3536.

You'll be able to download Form 3536 below this video, but we're going to recommend that

you get help with this as it's quite complicated.

We'll cover more on this in just a minute.

Next, Form 568, LLC Return of Income.

In addition to paying the $800 Annual LLC Franchise Tax with Form 3522 (due by all LLCs)

and filing and paying the Estimated Fee (for only LLCs with income over $250,000), all

LLCs also need to file what's called an LLC Return of Income, Form 568.

Form 568 pays taxes on previous year's income, just like regular federal taxes.

Again, Form 568 is filed by all LLCs regardless of income.

Form 568 is due by the 15th day of the 4th month after the end of your taxable year.

This will most likely be April 15th if you run your tax year January to December (which

a 99%of our members do).

Think of Form 568 as a summary of all the LLC's financial activity during a given tax

year.

The purpose of filing form 568 is to: report the Estimated Fee for your LLC, report the

$800 Annual Franchise Tax, report and pay taxes for any members who are not California

residents, report income, deductions, gains, losses cost of goods sold, salaries, and more.

We're also going to recommend that you get help from an accountant with Form 568 as this

one is definitely confusing.

It's 7 pages long.

Other Tax Requirements and Recommendations.

Depending on your LLC's income, how many members your LLC has, whether or not you have employees,

what state the members are a resident of, and what type of business you have, you most

likely need to file additional forms (besides what we have already mentioned), and you may

also have to pay additional taxes to the state.

Such tax documents might be a Schedule K-1, a Schedule EO, a Schedule D, and other documents.

Calculating your LLC's taxes can be complicated and if done improperly can negatively impact

your LLC.

We strongly recommend that you hire an accountant.

Again, California taxes are very complicated.

Hiring a tax professional will not only help keep your LLC in compliance with the State,

but it will also give you an advisor to go to further business questions.

Whether your business turns a profit or loses money, you still need to file tax documents

every year.

This is not something to be taken lightly.

If you want to run a serious business and not get into trouble with the State, you should

get assistance in filing your taxes properly.

A referral from a friend or someone else you trust is usually the best way to find someone

to do your taxes.

You can also ask co-workers, acquaintances from local clubs or organizations, your neighbors

and other business people.

You can also ask your Twitter, Facebook, LinkedIn or other social media friends.

It's as easy as typing into your social media account, "Hey, I just form an LLC.

Anyone know a good accountant?"

If you can't get a personal referral,then try doing a search online for "accountant"

or "certified public accountant" and looking for someone with good reviews.

Also, take a look below this video.

We've included some good resources to help with your search.

You should also want someone who's a good fit for your company, makes you feel comfortable,

and is willing to answer all of your questions.

It should be someone you like personally as well as professionally.

It's okay to take your time to find the right person.

We recommend talking with at least 2-3 people before making your final decision.

A good thing to keep in mind is that these professionals are interested in your business.

They'll gladly give you 10-15 minutes (if not more) of their time, so don't feel pressured

to go with the first person that you talk to.

And hey, if you really want to find a rock star tax professional, why not speak to 7

or 8 to make sure you really find the best one.

We hope that you find a great tax professional.

And that concludes this Lesson.