Can the Annual $800 LLC Tax be Credited each year?

**connect714** · 06-24-2009 09:29 PM

From the book "The Small Business Start-Up Kit for CA" by NOLO.
books.google com
/books?id=Vsd3-qKXScgC&pg=PA149&lpg=PA149&dq=LLC+Taxes+%24800&sou rce=bl&ots=qRMvxcP5yq&sig=8SYsie5P-EBY9UK_XnW0qhISeuc&hl=en&ei=0cpDSorGEITasgPwrcXODQ &sa=X&oi=book_result&ct=result&resnum=8

It states:
"The LLC tax is an $800 annual payment...

*On the Plus Side: the $800 can be credited towards the other tax the LLC may owe at year-end. "

Here is an example they list: Chad plans to open his restaurant as an LLC and $800 minimum tax for the year is due Sept 15. When Chad reports taxes the following April in the following year he can count the $800 he prepaid toward any LLC taxes the restaurant owes. However he'll have to pay another $800 min tax by April 15 (the next year).

Does this mean basically that this $800 can be used to subtract off that year's taxes?

In other words:
For example, let's say your taxes are $1000 for the year: (excluding LLC tax)
Would you total tax be $1000? Or $1800?

**connect714** · 06-25-2009 10:34 PM

OK my question was a little fragmented,

Let me try to make my question more clear:

LLC Tax is broken down into 2 parts:

1. Federal LLC Tax: Which basically all profits => "Passes through" to your personal income just like Sole Prop taxes work.

2. State LLC Tax: => Which is the $800 annual fee for CA.

According to the statement from the Nolo Book: They make it seem like the $800 can be credited towards Federal LLC Tax offsetting any other taxes you must pay.

However after talking to the CA Franchise Board, they said the $800 cannot touch the Federal tax.

And that this $800 credit does not apply unless your LLC makes more than $250K.

I assume that the Franchise Board would know more on this matter and that the NOLO Book did a bad explaination on the subject.

Can anyone please clarify or confirm any of this?

I'd like to know whether or not I'd pay an additional $800 each year ON TOP OF ALL OTHER TAXES for forming an LLC.

**paul2145r** · 06-26-2009 02:10 AM

Why not form the LLC next door in Nevada? I'm pretty sure the Franchise fees involved in working through another state are lower than $800...

**chuff1026** · 06-26-2009 04:18 AM

its actually against the law for a CA resident to form a corp in Nevada without actually doing business there
its not a clear cut law but you will be walking on thin ice

**LSnyder** · 06-26-2009 02:39 PM

Originally Posted by chuff1026

its actually against the law for a CA resident to form a corp in Nevada without actually doing business there
its not a clear cut law but you will be walking on thin ice

Chuff's statement is actually incorrect. You can live in one state and register your business in another. What you need is a physical address in the state where you are registering your business. This can be done by obtaining what is called a Registered Agent that is established in that state such as an attorney.

Our office forms entities in Nevada on a regular basis for entrepreneur's all over the United States.

If you need assistance forming your entity feel free to call our office.

Best of Luck!

**connect714** · 06-26-2009 02:44 PM

Yes Chuff's statement is incorrent.

However:

**connect714** · 06-26-2009 02:54 PM

Originally Posted by paul2145r

Why not form the LLC next door in Nevada? I'm pretty sure the Franchise fees involved in working through another state are lower than $800...

About setting up in another state to avoid high CA fees: Every source seems to recommend avoiding doing so MOST of the time:
(And please correct me if I am wrong Lisa)

https://www.creditmakeover.biz/credi..._my_state.html
"Best Tax Busting Buisness Structures" by Nick Braud.

The only exception when it comes to incorporating in another state is for liability reasons and not fees/taxes avoidance reasons.

Which brings up my question again:

Can anyone clarify or confirm,

if I'd pay an additional $800 each year ON TOP OF ALL OTHER TAXES for forming an LLC in CA?

Or can I deduct the $800 LLC Tax Fee off my other taxes?

http://books.google.com/books?id=Vsd...esult&resnum=8

**LSnyder** · 06-26-2009 02:58 PM

Let me run this question by my employer.

**connect714** · 07-07-2009 02:00 PM

Lisa did your employer know?

Did anyone ever figure out the answer to this question?

I'm about to form an LLC regardless, but it would be nice to know....

**LSnyder** · 07-07-2009 02:11 PM

I emailed your question to him however, he has been out of the office for quite some time. My suggestion at this point would be to ask someone from the state office where you decide to form your entity.