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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29951
Experience:  Taxes, Immigration, Labor Relations
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I created a C-corp and funded it with qualified retirement

Customer Question

I created a C-corp and funded it with qualified retirement assets in order to buy a business. Went through proper channels and completed a few months back. I ended up purchasing an insurance agency. The insurer (and state of CA) is requiring that my entity be named a specific way (must include the word insurance and my personal name) in order to get paid. Changing the name of my C-corp seems to be a hassle. If I created a wholly owned LLC of the C-corp, would I have to pay the $800 minimum tax in CA for both the C corp and the LLC?
Submitted: 2 years ago.
Category: Tax
Expert:  Lev replied 2 years ago.

Yes - if you will have TWO separate legal entities - EACH entity will be subject to the CA franchise tax

The current minimum tax is $800 as long as the entity exists.

See some details here

https://www.ftb.ca.gov/businesses/bus_structures/LLcompany.shtml
And that minimum will apply separately to each entity.
Sorry if you expected differently.

Customer: replied 2 years ago.
Did not know what to expect. So i need to figure if the second entity will provide me $800/yr of value.. Do you see any benefits to the wholly owned LLC of the C corp? Either tax wise or legal protection wise?
Expert:  Lev replied 2 years ago.

There will no tax benefits as that LLC will be ignored for income tax purposes as disregarded entity.
For legal protection - yes - C-corporation as an owner of the LLC will have its assets protected against the debt or claims of the LLC. So if LLC activities carry some risk - that protection could be valuable.
If C-corporation will not run business activities in California - you might want to move it to a different state - and avoid CA franchise tax.
For instance if that will be Nevada C-corporation - and it will own CA LLC - only CA LLC will be liable for the franchise tax.