For Californians

ppthump · #1 10-09-2015

Ran a few things by a tax attorney yesterday. I wanted to share one of the things he mentioned in case anyone else is living in CA. Filing for a LLC or S corp in CA will cost you $800/year in addition to the usual filing fees, PER llc/s corp. This is the "minimum franchise tax", although contrary to the name its not a minimum tax, its in addition to your tax. For California residents, it doesnt matter if you are fully online, do no business with anyone in CA, and dont have a physical location for the business, if you file your LLC / s-corp ANYWHERE in the US, you still owe CA $800/year per LLC/s-corp because its considered a foreign operator. So, just be aware that if you do need EIN's, and you live in CA, no way around it you'll have an extra $800 tax per.

jeffweico · #2 10-09-2015

I would double check this with your attorney. Because it does not seem to me that the state of California could justify taxing an LLC located in another state just because a member of the LLC lives in California, unless it was registered as a foreign LLC doing business in the state of California with the California Secretary of State.

But you are right that it costs a fortune to set up a business in California. Which is why many people who have businesses decide to register their LLC's out of state and keep their operations out of state.

ovidiu · #3 10-09-2015

This could very well be correct. I remember a story about how California's tax board was running down those who registered companies in neighboring states to avoid paying taxes to Cali.

jeffweico · #4 10-09-2015

It MIGHT be true, but I would love to hear the legal reasoning behind it. Many LLC's have several members and just because one of them happens to live in California should not mean that the state can tax the entire LLC based on that, unless the LLC was OPERATING in California, with some sort of a physical presence. Then they would be classified as a foreign enterprise doing business in the state. That I can understand.

ppthump · #5 10-10-2015

Well, thats the opinion of a tax attorney from San Francisco, not mine. I couldnt begin to give you a justification for it, since I am not one myself, but I was told that as a person "domiciled" in CA, even if I did no business here I would have to pay the $800 tax fee for any llc / s-corp I established anywhere in the country. He said if its here its called a minimum franchise tax fee, if its in another state its called a foreign operating entity. Either way it resolves to $800/year in addition to any taxes. I read somewhere that if there are two equal owners (presumably both CA residents) they would split the fee (as they split profit/loss), but I have no idea what would happen if, say, one of ten owners lived in CA.

elmo · #6 10-10-2015

I've spoken to many tax attorneys. You're 100% correct. If your place of residence is CA you will have to pay the fees. They are well aware people are living in CA and registering LLCs in other states to avoid steep fees

yotano211 · #7 10-10-2015

Reason why I will never live in CA.

MM78 · #8 10-10-2015

Quote:

Originally Posted by yotano211

Reason why I will never live in CA.

Earthquakes scare Ya?

jeffweico · #9 10-10-2015

This is what I hate about state and local governments. They jack up the taxes so high, making it cost prohibitive to do something and then they create laws to try to force people to comply.

I lived in Chicago my entire life, but I moved out because I was being taxed to death. Every day, there seemed to be another tax. And not just a 3% tax on something, but HUGE taxes. In Cook County (which encompasses Chicago) there is an almost $5 per month tax on cable TV and internet service. Ditto for cell phones. Each can of soda carries a tax, and God help the poor smokers - a pack of cigarettes in Chicago is now $10, all because of taxes. But what finally got me was that I was paying $7,000 per year in property taxes. So, I had to pay $583 per month just to live in my own house. And it was NOT a huge house, just an average house. And with the state unable to meet it's pension obligations (Illinois is insolvent), I could see everything getting exponentially worse. So, I moved out of state. It would not be an exaggeration to say that the first $1,000 per month I earned went for state and local taxes, not even counting federal taxes. It was just too much. I now live 40 minutes away from Chicago in Indiana. My property taxes are under $1,000 per year. Everything is cheaper here. My house is larger and nicer. My neighborhood, except for the occasional stolen bike, is pretty much crime free. I have a huge deck, which would not have been possible in Chicago unless I had tons of money. And I don't have to fear reading the newspaper about which politician is proposing which new tax on what.

It seems that California is moving in the same direction. I wouldn't mind paying Canadian style taxes if we had Canadian style benefits. But these new taxes are never to give people more benefits, it is always to maintain the status quo.

How does it help California to stop people from starting businesses in their home state? It is counterproductive. $800 per year is outrageous. If a corporation or an LLC is earning money, then the state automatically makes money through corporate or individual taxes, but I guess that was not enough for them. I wonder how far they will go to enforce it?

In Chicago, when they decided to put a $5 tax on a pack of cigarettes, they started stopping cars with Illinois license plates coming back from Indiana (Where a pack of cigarettes was $2 at the time) and confiscating their cars if they found more than 3 packs of cigarettes bought in Indiana in the car. I thought that was outrageous.

I think the situation in California is equally outrageous.

slokor · #10 10-10-2015

I think this is the first time the thought "Im glad I dont live in California' has ever gone through my head...
Actually for the weather its probably still worth it...

glacier922 · #11 10-10-2015

I could have sworn we just talked on the phone. I just dissolved my llc and legalzoom charged a stupid fee to do business with them on this. Registered in Wyoming thinking that I didn't need to pay that 800 dollar fee, but I have to anyways! I live in California anyways! The accountant says I had to register in CA, bummer. So, it's just best if I did a sole prop.

Quote:

Originally Posted by ppthump

Ran a few things by a tax attorney yesterday. I wanted to share one of the things he mentioned in case anyone else is living in CA. Filing for a LLC or S corp in CA will cost you $800/year in addition to the usual filing fees, PER llc/s corp. This is the "minimum franchise tax", although contrary to the name its not a minimum tax, its in addition to your tax. For California residents, it doesnt matter if you are fully online, do no business with anyone in CA, and dont have a physical location for the business, if you file your LLC / s-corp ANYWHERE in the US, you still owe CA $800/year per LLC/s-corp because its considered a foreign operator. So, just be aware that if you do need EIN's, and you live in CA, no way around it you'll have an extra $800 tax per.

yankee · #12 10-10-2015

MA is $520.00 filling and $500.00 annually.

jeffweico · #13 10-10-2015

Indiana is $85. Illinois used to be reasonable, but they jacked the price up to $600.

jeffweico · #14 10-10-2015

I just posted a list of filing fees by state, as well as their minimum annual fee. Most states have nominal fees, but California, New York, Illinois, Massachusetts and Tennessee have fees that are extortionate.

http://www.aspkin.com/forums/everyth...tml#post712705

Gamefreak · #15 10-10-2015

the first year in business the tax is free and every year after the first one then you have to pay the $800 fee. Cooperation tax or something they call it.

rnj · #16 03-14-2018

Can somebody please explain if I register for an EIN number and give paypal those last 4 number of the EIN instead of SSN do I still need to file for an LLC? When the 1099k is sent will it be in the name of my paypal account but under my EIN number? How will I file taxes while having a EIN number?

Gladiator · #17 03-14-2018

I haven’t always registered the LLCs.

rnj · #18 03-23-2018

Is there a penalty/fee if you dont register an LLC?

Gladiator · #19 03-23-2018

Nope. Just assign your debt to yourself or a business. A tax professional or tax software can explain it. I file a few forms to merge income on sub-businesses and file under one number. It's easier cause I'm lazy.

rnj · #20 03-24-2018

Quote:

Originally Posted by Gladiator

Nope. Just assign your debt to yourself or a business. A tax professional or tax software can explain it. I file a few forms to merge income on sub-businesses and file under one number. It's easier cause I'm lazy.

What is the difference/benefits between registering an LLC and NOT registering an LLC?

When I give paypal my EIN number for the 1099k will this form be under the name of my stealth paypal account?

If the 1099k form is in my stealth name how will I go about filing taxes?

I have never filed for an EIN number before. Thanks for the input and response I appreciate it.

Gladiator · #21 03-24-2018

Other than having a main one to file taxes, for stealth nothing. Legitimate businesses and operations it’s a must for several reasons I don’t think I need to go into. It just lets you verify and run more money through a PayPal and have multiple accounts in this situation.

You will get it issued to the Business. You pay taxes under the EIN and/or report the income under your own name.

rnj · #22 03-25-2018

Thanks for responding!