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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16547
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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How easy or hard it is to establish a pass through taxation

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How easy or hard it is to establish a pass through taxation in an LLC located in California.
What is necessary?

Thank you

Gregory

MyVirtualCPA :

Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

MyVirtualCPA :

Pass through taxation is the default taxation of a pass through entity, so there is nothing special you need to do to establish pass through taxation. All you need to do is have your LLC set up.

Customer:

Is this true in California?

MyVirtualCPA :

It's true anywhere

Customer:

I thought I read somewhere that CA makes it a little more complicated.

MyVirtualCPA :

No, it's the same anywhere. California just has a minimum $800 per year franchise tax on any business

MyVirtualCPA :

you can't get away from that by being a pass through entity you would still owe the franchise tax

MyVirtualCPA :

but your income tax would be pass through

MyVirtualCPA :

So, you still have to file business tax returns in addition to your income tax returns, in California. You can't get around this.

Customer:

Ah. OK that's the deal. Can the franchise taxes be offset by losses if the LLC is working at a deficit?

MyVirtualCPA :

No. The franchise tax is a minimum tax

MyVirtualCPA :

You could lose $1 million and still have to pay the $800

MyVirtualCPA :

You also have an LLC fee based on your gross receipts, if your gross receipts are in excess of $250,000.

MyVirtualCPA :

http://www.hhcpa.com/blogs/income-tax-accountants-cpa/schedule-c-doing-business-in-california-as-single-member-llc

MyVirtualCPA :

Is there anything else I can assist you with? If not, please rate my response as "excellent" so that I may receive credit for assisting you today?

Customer:

Ah yes...the gross receipts is also unique to CA right?

MyVirtualCPA :

Yes, unique to CA as well.

MyVirtualCPA :

It's a state tax thing. CA likes getting paid :-)

Customer:

Right. Thank you for you help.

Megan C and other Tax Specialists are ready to help you

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