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California LLC/Corporation Tax & Legal Requirements

updated 3/15/16

Check the Status of Your CA LLC or Corporation

Check the status of your CA registered LLC or corporation using the CA Secretary of State business search - by name or entity number. The search results will list basic info including the entity status. The status should be "active". If the status is "suspended" we can assist you in determining the cause of the suspension & correct the problem. A suspended LLC or corporation is not legally permitted to conduct business & has lost its legal standing.

Statement of Information - CA Secretary of State

The California Secretary of State requires every LLC & corporation registered in the state of California to file a Statement of Information within 90 days after filing of its original Articles of Incorporation and annually or bi-annually thereafter (depending on entity type). It is important to comply with this filing requirement because there is a $250 penalty assessed for each failure to file. In addition, failure to file can lead to suspension of the LLC or corporation by the Secretary of State. The statement of information forms for each entity type are available on the SOS website as well as the ability to e-file the Statement of Information for corporations only.

Franchise Tax & LLC Fee - Franchise Tax Board

The Franchise Tax Board requires a minimum tax of $800 annually from both LLC's & corporations doing business in the state of California (even if they were set up & registered in another state). The tax is referred to as a "minimum tax" because all entities are subject to the $800 minimum even if there was no income or a loss for the year. There is an exception for newly created corporations - the minimum tax does not apply to the first year the corporation is required to file a tax return. The minimum tax should be paid in advance by April 15 using Form 100-ES to avoid penalties and applies to both LLC's &.corporations. If the corporation has income for the year the tax may be higher than the minimum: California tax rates for C Corporations is 8.84% (minimum $800) and the tax rate for S-Corps is 1.5% (minimum $800). An LLC is not subject to additional franchise tax above the $800 minimum, but instead is subject to the LLC Fee if its gross receipts are $250,000 or higher. For additional information regarding Franchise Tax Board requirements for corporations see the Guide for Corporations Starting Business in California.

Personal Property Tax - County Assessor

In Los Angeles County businesses with equipment that cost more than $100,000 (inventory is exempt from tax) must file a Business Property Statement - Form 571-L each year by April 1. Businesses with equipment that cost less than $100,000 are not required to make the annual filing, but are still subject to personal property tax based on an initial appraisal which can be later adjusted. The LA County Assessor website has more information as well as the ability to e-file Form 571-L. If you are in a county other than Los Angeles visit the county assessor website of your county for information.

Corporate Bank Accounts & Accounting Records

All corporations must have at least one checking account in its name and maintain accounting records. In addition the corporation might need to open a savings account, CD, pension account, investment account, etc. depending on its particular requirements. It is important that corporate and personal transactions are not comingled: for example, personal expenses of the officers/shareholders should not be paid directly from the corporate checking account.

S-Corp Election - Internal Revenue Service

If you plan to operate as an S Corporation you must make a timely election with the Internal Revenue Service. Many times this is done by the attorney or other person who sets up the corporation. However, many times this requirement is neglected, causing headaches later on when the IRS determines the election was not made.

Corporate Minutes

It is important to maintain the corporate minutes in order to maintain your corporate status. Adding new stockholders, making large purchases, taking out loans or entering leases; these are just a few of the events which should be recorded in the corporate minutes. The size of your company and the complexity of the transaction involved will dictate whether it is necessary to involve an attorney. You can purchase do-it-yourself kits that will allow you to prepare the minutes yourself. These can be purchased from sources such as Nolo. For more information regarding corporated minutes read "Running a Corporation: Keeping the Minutes". There are also on-line services available for preparing and maintaining your corporate minutes such as LegalZoom.com.

Other Requirements

In addition to the above, there are many other requirements which apply to any business (not just corporations) depending on the circumstances. Examples are: business license, city tax returns, sales tax returns, payroll tax returns and filing 1099's. We can assist you in determing what is required for your LLC or corporation.