Ask HN: Any way of avoiding the $800/yr FTB tax on CA LLC's?
6 comments
C-Corps have the $800 minimum franchise fee waived for the first tax year. Otherwise, no - there's not a legal way to do it.
You can register an LLC in almost any state; you don't have to live or work there. You just need a registered agent -- some address with a person available to take official mail for your business -- in the state. And there are companies that sell registered agent services for much less than the $800/year tax you would avoid.
I've heard you are supposed to pay the $800 a year CA tax even if you are incorporated out of state, as long as your operations are really in California.
I don't live in CA, so I don't know whether the state taxes foreign entities that do business in their state, you may very well be right.
It doesn't prevent you from organizing an LLC elsewhere if you had reason to, though.
It doesn't prevent you from organizing an LLC elsewhere if you had reason to, though.
Thats all really helpful actually. Its clear though that there is still one outstanding question, i.e. does CA have a specific requirement that even if youre incorporated out of state you are still responsible for the $800/yr ftb tax.
I think Im going to register in Oregon b/c I would have access to individuals who could act as registered agents but I still need to find the answer to the above question.
I think Im going to register in Oregon b/c I would have access to individuals who could act as registered agents but I still need to find the answer to the above question.
Next time you hear your politician complaining about corporate fat cats who don't pay their fair share, vote for the other guy.
You should incorporate in Delaware due to their favorable taxation policies and their relatively low yearly franchise tax ($200). Check out http://www.bizfilings.com. They will even act as a registered agent for you.
Why doe the limited partnership pay the annual fee of $800
but not a general parnership?
Registration of a limited liability company (LLC) with the California Secretary of State (SOS) will obligate an LLC that is not taxed as a corporation to pay to the Franchise Tax Board (FTB) an annual minimum tax of $800.00 and a fee based on the annual total income of the entity. The tax and fee are required to be paid for the taxable year of registration and each taxable year, or part thereof, until a Certificate of Cancellation is filed with the SOS. (Rev. and Tax. Code §§ 17941 and 17942.)
Now Im wondering, as a freelance software developer if its possible to avoid this tax somehow (legally of course, I realize that simply not paying it is technically an option :).
Since my clients are remote and my work is in software for entities around the states do I have any legal leg to stand on to say, incorporate in another state which has lower annual LLC taxes? Since Im living in CA and doing the work here I take it thats a no.