Yes, the first year of business is subject to the $800 California LLC cost. This means that even if your LLC had a loss the first year, you would still be required to pay the charge. This fee is regarded by the Franchise Tax Board as the minimal tax applicable to California-based LLCs.
Most of the time, LLC fees are not tax deductible. However, for the purposes of state taxes, you can deduct the $800 annual franchise tax amount from the gross revenue of your LLC. This means that your LLC’s obligation to pay state taxes may be reduced by the franchise tax cost.
Your LLC will be charged fines and interest if you fail to pay the California franchise tax. The California Franchise Tax Board may even dissolve your LLC if you fail to pay the tax for a number of years. Penalties for failing to pay the franchise tax can be severe.
LLCs in California are permitted to have just one member. But establishing a single-member LLC in California follows the same steps as establishing a multi-member LLC. Articles of Organization must be submitted to the California Secretary of State, together with the $70 filing fee. Additionally, you’ll need to register your LLC with the California Franchise Tax Board and get an EIN from the IRS.
The $800 yearly franchise tax is still applicable to LLCs that had no revenue in California, but you may be able to subtract the amount from your LLC’s gross income for the purpose of paying state taxes. Failure to pay the franchise tax may result in fines or possibly the termination of your LLC. Additionally, an LLC with only one member may be formed in California, and the procedure is the same as for an LLC with multiple members.