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Anne
Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 2355
Experience:  Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
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I HAVE A CALIFORNIA LIMITED LIABILITY COMPANY REGISTERED IN

Customer Question

I HAVE A CALIFORNIA LIMITED LIABILITY COMPANY REGISTERED IN CALIFORNIA SECRETARY OF STATE. I AM THE ONLY MEMBER OF THE LLC, SINCE I AM THE ONLY MEMBER I OPT TO FILE IT ON MY FORM 1040 SCHEDULE C. NOW I RECEIVED A LETTER FROM THE CALIFORNIA FRANCHISE TAX
BOARD ASKING ME TO FILE CA FORM 568. DO I REALLY NEED TO FILE FORM 568 ? IF NOT HOW WILL I TELL THEM THAT I DON'T NEED TO FILE FORM 568 ? THANK YOU
Submitted: 1 year ago.
Category: Tax
Expert:  Anne replied 1 year ago.

Hi

Thank you for requesting me. When you set up the LLC in CA, they would have given you an Employer Identification Number, (EIN), and would have assigned you an entity (Corporation, Partnership, etc) It's really important that I know what CA considers your entity to be.

I'm just on a fact finder mode at the moment, so could you please tell me why the LLC was registered in CA? and not where you live?

Were there ever other members of this LLC, either working for it, or just investing in it?

Once I get all the information, I can better advise you, AND look for exceptions to filing the Form 568

Customer: replied 1 year ago.
I live in CA where the LLc was registered, no other member or investor of the LLc except me .
Expert:  Anne replied 1 year ago.

was this registered as a single member S Corp? a Sole Proprietor? I'm sorry to keep asking, but it makes a big difference. You would have gotten papers when you registered the business. CA is one of the few states that has big penalties for NOT filing Corp taxes, even if the business was "inactive" for the year. So that's why I want to know EXACTLY what this business was registered as.

Customer: replied 1 year ago.
It is a limited liability corporation not an S Corp nor a Sole Proprietor.
Expert:  Anne replied 1 year ago.

Hi

I know that there can be some fairly hefty penalties for not filing the Form 568. I also know a colleague in CA who has dealt with this situation more than once.

I put a call into him last night to see if we could brainstorm to see how to best handle this situation and negate the penalties as much as possible.

If you would please let me know the bot***** *****ne of your Sch C (your net profit) that you entered on line 12 of your Form 1040, along with your total tax liability from Form 1040 line 63. That would help, since one of the penalties is based on the amount of tax

Unfortunately, we had big storms here last night,and since I live in the country, if we lose our power (as we did last night) we're not on the high priority list to have our power turned back on.

We're expecting more of the same for tonight, so I wanted to touch base with you to let you know that I am working on this, and in fact have I have called the person who I trust completely for his input, especially since he mentioned working though one of these not too long ago.

I understand where you were coming from, filing the Sch C, but CA doesn't, so please be patient just a little longer. I don't want you to have to pay the penalty if there's anyway to lower it, or abate it completely.

Thank you

Expert:  Anne replied 1 year ago.

It sounds like you are considered a disregarded entity/Sole Proprietor, which is how you filed your business on your Form 1040 form, and that was correct for your Federal tax return.

CA DOES require the Form 568 . In the notice you received from CA, does it state if you sent the $800 minimum annual fee.

If yes, it would be advisable to attach the Form 568 with the rest of your return and send it to the CA Franchise Tax form. Neither myself and my colleague in CA, have ever seen them charge more than the $800 annual fee.

If you have not paid the $800, you are considered late, and you will be charged interest and penalties. It would be advisable to call the state and get an updated balance of what you owe.

For more in depth information, please see below:

https://www.ftb.ca.gov/businesses/bus_structures/LLcompany.shtml

If you have any questions, please post them here, and I'll be notified.

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