California LLC Annual Fees and Compliance

If you have registered an LLC in California, you are likely aware of the annual fees. These fees amount to $800 per year for simply maintaining an LLC in the state, even if your business incurs a loss. Furthermore, you might face additional fees based on your sales figures (see table below).

Understanding California LLC Fees

Many LLC owners are surprised by the requirement to pay these fees annually, even if their business is inactive or losing money. Moreover, some may incorrectly believe that declaring their LLC as a Wyoming or Delaware corporation exempts them from California state taxes. However, if your business operates or maintains a facility in California, you are still liable for California state taxes.

Consequences of Non-Payment

Failing to pay these fees can lead to several serious consequences, including:

• Bank account levies
• Property liens, which may appear on your credit report
• Suspension of your LLC by the Secretary of State
• Late charges and interest
• Penalties

Solution: Filing Form 568

To resolve these issues, you need to file a California FTB Form 568 for each year your business was registered in California. This requirement applies even if you file as a sole proprietor on your federal return. Most professional software packages can generate this form for you.

Steps to Resolve LLC Tax Issues

1. Contact the Franchise Tax Board (FTB):
   • Call the FTB practitioner line at 916-845-7057 to get information on notices.
   • To discuss taxpayer issues over the phone, a power of attorney form is necessary. You can file this form online through the FTB website for quick processing.
2. Gather Assessment History:
   • Request detailed information about assessments and notices by faxing the FTB correspondence department at 916-845-9300. Note that this process may take up to 90 days.
3. Consult with Complex Situations Department:
   • Call the complex situations department at 888-635-0494 to discuss potential liens and gather information on sales conducted in California. Use your sales tax reports to determine gross sales for Form 568.
4. File Form 568:
   • Prepare and file Form 568 for each year the LLC operated in California. Send all forms in one package to the following address: State of California, Franchise Tax Board, PO Box 942857, Sacramento, CA 94257-0511
   • Include a check for the total amount due based on the Form 568s you are filing. This amount may differ from the amount claimed on the assessment notice.

Required Client Information

To proceed, please provide the following:

• State returns for the years in question from other states where you do business.
• Total sales in California for each year from 2008-2015 (percentage of total federal sales is acceptable).
• California sales tax reports for each year of business.
• Individual tax returns for the relevant years, if available.

Proposed Action

We need to file Form 568 for each year with the FTB based on your California sales. I will complete and file these forms for you at a fixed price per year. Additionally, I can handle filings annually to prevent future issues such as levies, liens, and penalties.

Please send me your sales tax reports and a listing of assets owned in California at the end of each year.

George Dimov, CPA, is registered with the Franchise Tax Board of California as a tax preparer and holds a CPA license recognized in all 50 states, along with a Federal PTIN.