Legal Question in Business Law in California

K.D.,

The IRS carefully scrutinizes any organization/group that applies for tax exempt status. Although I would need more information to properly advise you, in most cases, it is best not to mix a prior unrelated and non-exempt venture into a later tax exempt entity. This could reduce your chances of obtaining tax exempt status for your current venture.

In forming the tax-exempt entity, there are two steps. First, you would form the entity/organization of choice. The type of formation you choose will again depend on your specific venture. You should make sure that the formation is in compliance with IRS regulations and standards. The next step would then be to apply to the IRS for tax exempt status. If you need any assistance with the structuring and formation of your venture, feel free to contact me.

As for the LLC, it is not possible to reverse the franchise tax. Assuming that this is a California LLC, California law mandates a mandatory annual minimum franchise tax of $800 that applies to all LLC's across the board regardless of income. If you are no longer operating a viable business under that LLC and do not plan on continuing, you should make sure that the LLC is properly dissolved so that you do not continue to incur liability (which includes the annual $800 California franchise tax.).