LLC Tax Reminders

By: Tamara B. Pow, Esq .

As many of you are aware, annual fees for California limited liability companies were due June 15 th . So here are a few pointers to keep in mind as you are filing forms and paying fees. While the due date for filings may have changed this year for some LLCs, the estimated fee due has not.

LLC Fee:

The LLC fee covers income originated from activity within the state of California only, rather than income derived from all applicable markets worldwide. So if an LLC does business worldwide, or even in more than one state in the U.S., only the income earned within the state of California is included in the LLC gross receipts calculation. Even though taxpayers have not reached the midway point to the year, they must still estimate their total 2017 annual income based on the first five and a half months of the year. If there is a remaining balance left as a result of underestimating your total income for the year, that balance must be paid by the next due date for filing an LLC’s tax return (March 15 th for either LLCs taxed as a partnership or single-member LLCs owned by a passthrough entity; April 15 th for all other LLCs).

The estimated fee is required to be at least 100% of the current taxable year fee. If the tax- paying LLC’s estimated fee payment is late or less than the amount owed, the Franchise Tax Board (FTB) will assess an underpayment penalty, which amounts to 10% of the difference between the fee the taxpayer paid and the fee that is owed. Be aware that there is no reasonable cause exception for this penalty. However, there are two other types of exceptions. First, there is a prior-year exception if the timely paid estimated fee is equal to or greater than the fee from the prior year. Second, there is no penalty for an LLCs first-year filing in California, since there is no prior year to begin with.

LLCs Taxed as Corporations:

For LLCs generating annual receipts below $250,000, within the state of California only, the annual fee amount for 2017 is $0. For those generating from 250k up to 500k, the annual fee is $900. For those making from $500k up to $1 million, the annual fee is $2,500. For LLCs earning more than $1 million but less than $5 million, the fee is $6,000. And finally, for LLCs earning $5 million or more per year in the state of California, the 2017 annual fee for LLCs is $11,790.

The next few reminders apply to LLCs that choose to be treated as C corporations or S corporations, who are not required to pay the LLC fee or the annual tax, although C corporations and S corporations are subject to the $800 minimum franchise tax. Furthermore, a single member LLC that has decided not to be taxed as a corporation, but is owned by a C or S corporation, is subject to the annual tax and fee. In this case, the LLC is required to file a Form 568, Limited Liability Company Return of Income, to pay the tax and fee, and will also be subject to the estimated fee requirements.

As for LLCs that are treated as C or S corporations, they must file either Form 100, California Corporation Franchise or Income Tax Return, or Form 100-s, California S Corporation Franchise or Income Tax Return.

Even though the deadline for filing the LLC fee has passed for this year, keep these amounts in mind so that you can make sure you are paying correctly. And if you have not paid your LLC annual fee, make sure you pay it immediately to avoid further penalties and interest.