Yes, even if your LLC didn’t generate any revenue in California, you must still file a tax return. Your LLC is nonetheless liable for the state’s $800 minimum franchise tax even though it has no income during the tax year. Regardless of the LLC’s success, this tax is required. You may, however, submit a zero-dollar tax return if you have no income to report.
In S Corp, the “S” stands for “Small Business Corporation.” An S Corporation is a specific kind of corporation that permits pass-through taxes, which means that the income, deductions, and credits of the corporation are transferred to the shareholders’ individual tax returns. Because it offers the limited liability protection of a corporation and the tax advantages of a partnership, this type of corporation is popular among small business owners.
You must first create a regular corporation by submitting articles of incorporation to the state in order to create a S Corporation. Once your corporation is established, you can request to be taxed as a S Corporation by filing an election with the IRS. Your company must fulfill a number of standards, such as having no more than 100 shareholders and issuing just one kind of stock, in order to be eligible for S Corporation status. How Are S Corporation Owners Paid?
Owners of S Corporations have a choice between receiving payment as an employee or as a shareholder payout. The owner may be paid a salary or other wages that are subject to employment taxes as an employee. The owner is eligible to receive a percentage of the corporation’s profits that are exempt from employment taxes as a shareholder payout. It’s crucial to remember that, in order to avoid potential IRS problems, the owner’s pay must be fair and consistent with industry standards.
In conclusion, the $800 California LLC cost is an annual requirement, and an LLC is still required to pay the $800 minimum franchise tax even if it had no revenue. S Corporations are a preferred option for small firms due to its limited liability protection and pass-through taxation. You must first create a conventional corporation and then file an election with the IRS in order to create a S Corporation. Owners of S Corporations may be paid as employees or as shareholder distributions, but all pay must be fair and consistent with industry norms.