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  • Corporation VS. LLC Taxes in California

Corporation VS. LLC Taxes in California

2023-09-11
  Corporation LLC
Filing Status As a C corporation. An LLC must have the same classification for both California and Federal tax purposes:

• Disregarded entity: Single member LLC can be classified as disregarded entity.
• Partnership: LLC can be classified as a partnership (more than one member).
• Corporation: LLC can elect to be classified as an association and taxable as a corporation.
Franchise Tax V.S. Annual Tax You must pay minimum franchise tax $800 whether your corporation is active, inactive, operates at a loss, or files a return for a short period (less than 12 months)
 • Taxed as Disregarded Entity or Partnership: LLC classified as a disregarded entity or as a partnership is subject to an $800 annual tax, even if it conducts no business in California.

• Taxed as Corporation: You do not need to pay annual tax, but you are subject to franchise tax.
Exception
For Franchise Tax or Annual Tax
• Newly incorporated or qualified corporation is not required to pay the minimum franchise tax in first year.

• Corporation is not subject to the franchise tax for a tax year if both of the following is true:tax year is 15 days or less; and you did not conduct any business in California during the 15 days. 		• Taxed as Disregarded Entity or Partnership: LLC classified as a disregarded entity or as a partnership is not subject to the annual tax and fee if both of the following are true: tax year was 15 days or fewer; and you did not conduct any business in California during the tax year.

• Taxed as Corporation: Follow the Corporation rule.
California Corporate Income Tax • The income tax for C corporations is the greater of 8.84% of the corporation's net income or $800 (Franchise tax).

• Any first-year net income is still subject to the 8.84% tax rate. 		• Taxed as Disregarded Entity or Partnership: LLC classified as a disregarded entity or as a partnership is not subject to the California Corporate Income Tax, you should report California income, deductions, and credits on your personal income tax return.

• Taxed as Corporation: Follow the Corporation rule.
LLC Fee N/A LLC classified as a disregarded entity or as a partnership is subject to an LLC fee, if its total income exceeds $250,000 "from all sources derived from or attributable to California" .
Forms California Corporation Franchise or Income Tax Return (Form 100) • Taxed as Disregarded Entity or Partnership: California Limited Liability Company Return of Income (Form 568).
• Taxed as Corporation: Follow the Corporation rule.
Due Dates Your minimum franchise tax ($800) is due on 15th day of the 4th month after the close of your tax year. • Taxed as Disregarded Entity or Partnership:
(1) Form 568: 15th day of the 3rd month after the close of your tax year.
(2) Annual Tax: You have until the 15th day of the 4th month from the date you file with the SOS to pay your first-year annual tax. For the subsequent years, the due date is 15th day of the 4th month after the beginning of your tax year.
(3) LLC Fee: you must estimate and pay the annual fee by the 15th day of the 6th month, of the current tax year.

• Taxed as Corporation: Follow the Corporation rule.

Disclaimer

All information in this article is only for the purpose of information sharing, instead of professional suggestion. Kaizen will not assume any responsibility for loss or damage.

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