Legal Question in Business Law in California

The $800 is a minimum annual fee due regardless of income or loss. Consult with an attorney in your area for specifics.

Kevin B. Murphy, B.S., M.B.A., J.D. - Mr. Franchise

Franchise Attorney

The following is cut-and-pasted from the Franchise Tax Board's Web site as their answer to the frquently-asked question (FAQ), "What is the minimum franchise tax?"

"Minimum tax is the amount you must pay the first quarter of each accounting period whether the corporation is active, operates at a loss or does not do business. The current minimum tax is $800. For new corporations that qualify or incorporate with the Secretary of State after January 1, 2000, the tax is measured based on their income for the year and subject to estimate requirements. For subsequent years, the minimum tax $800." I assume the rules is the same for LLCs.

At one time, there was a year-end grace period where businesses formed in the last couple weeks of a year didn't have to pay the franchise tax for that year. I did not find any reference to such a rule in my brief research today, but if this fits your situation, give the FTB a call and inquire.

I agree with the attorneys above. However, I would like to add that you have a few months from the start of your LLC to pay the Minimum $800 tax. Below is an excerpt is from the FTB 3522 Instructions Booklet, the form you need to file to pay for the LLC tax. Consult an attorney in your area to learn more about an LLC.

::::: FTB 3522 Instruction:::::

When to Pay the Annual LLC Tax

The annual LLC tax is due and payable by the 15th day of the 4th month after the beginning of the LLC�s taxable year (fiscal year) or April 15, 2010 (calendar year). The first taxable year of an LLC begins when the LLC files its articles of organization with the SOS. The first taxable year of a foreign LLC begins when the LLC is organized in another state. If the 15th day of the 4th month of an existing foreign LLC�s taxable year has passed before the foreign LLC commences business in California or registers with the SOS, the annual LLC tax should be paid immediately after commencing business or registering with the SOS.

Example: LLC1, a newly-formed calendar year taxpayer, organizes as an LLC in Delaware on June 1, 2010. LLC1 registers with the SOS on August 13, 2010, and begins doing business in California on August 14, 2010. Because LLC1�s initial taxable year began on June 1, 2010, the annual LLC tax is due by September 15, 2010 (the 15th day of the 4th month of the short-period taxable year). LLC1�s short-period (June 1, 2010-December 31, 2010) tax return is due by April 15, 2011. The annual tax payment for taxable year 2011, with form FTB 3522 also is due by April 15, 2011.

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