AVOID the CA Franchise Tax in 2024 (This Trick REALLY Works!)

[@ehsankhan4447]

I open corporate last year but never work on it and no transaction. Still now in April I’m supposed to pay 800$ ? Or is there any way to avoid and close This Corporate?

[@LegalTipsForSmartEntrepreneurs]

You are still liable for the $800 even if you didn't do any business. If you close it you *might* be able to avoid it; contact a business tax pro with experience working with the FTB and dissolutions.

[@stephaniehaber2794]

Hey! Thank you so much for this info. If you qualify to be waived the $800 fee, what do you need to do? Do you still need to submit anything, prove you qualify for exemption, or do you just skip paying/communicating about the fee all together?

[@LegalTipsForSmartEntrepreneurs]

Sorry I do not, you may need to contact the franchise tax board regarding the exemptions.

[@manyzz2164]

Hello Stephanie, did you get this figured out?

[@shailareddy5213]

What about the Assembly bill 85? it reads to me like You do not owe this tax in the first year anyway. SEC. 24. (a) It is the intent of the Legislature to apply the requirements of Section 41 of the Revenue and Taxation Code to Sections 9, 10, and 11 of this act.(b) With respect to Sections 17935, 17941, and 17948 of the Revenue and Taxation Code, as amended by this act, the Legislature finds and declares as follows: (1) The goal of this act is to help and reduce costs for first-year California small businesses. Existing law imposes an annual minimum franchise tax of eight hundred dollars ($800) on every corporation, and an annual tax of eight hundred dollars ($800) on every limited liability company (LLC), limited partnership (LP), and limited liability partnership (LLP), which may be difficult to afford for first-year businesses. As such, these taxes may stifle economic growth and job creation and may inhibit the formation of many small businesses.

[@LegalTipsForSmartEntrepreneurs]

Generally for corps you do not owe this tax in the first year. For LLCs you do, but the governor signed in the law waiving this fee if you start an LLC in 2021 through 2024.

[@sheshusandeep2055]

Hi, since California has waived off first year LLC fee of 800 dollars, if i form LLC in November 2021 when will I have to pay 800 dollars...? Is this benefit for 2021 or 2022... ? Should I wait till January 2022?

[@LegalTipsForSmartEntrepreneurs]

You benefit in the year you file for your LLC. If you don't intend to do any business in 2021, then you can wait until 2022 (do a future date filing if you want) and avoid the franchise tax for 2022.

[@ednasalinas8280]

@@LegalTipsForSmartEntrepreneurs The assembly bill 85 exempts the $800 for first year. If my LLC was registered in August 2021, I suppose I don't pay in 2021. Do I pay for the second year by Dec 31, 2022 or April 15, 2023. Thank you much.

[@LegalTipsForSmartEntrepreneurs]

@@ednasalinas8280 You are exempt for 2021 due to AB 85, the year you filed it. You pay for 2022 no later than April 15, 2022 (with some exceptions). See www.ftb.ca.gov/file/when-to-file/due-dates-business.html and kzbin.info/www/bejne/sH3LfWOFbc5lg9k

[@ednasalinas8280]

@@LegalTipsForSmartEntrepreneurs Thank you. I have learned a great deal from your videos.

[@ednasalinas8280]

@@LegalTipsForSmartEntrepreneurs Thanks for your videos, I have learned from them. About the form 568 through which I pay the tax for the year, that has to be filed before Dec 31, correct?

[@eb1941]

Great content. Question on a different topic. I have stock options that have vested in a start-up company in CA. I plan to sell them in the future, but at the time of sale I will be at least two years a resident of North Carolina. Since I will be out of CA for two tax years with no ties to CA, how would the FTB know I sold my options? Thanks for the help!

[@LegalTipsForSmartEntrepreneurs]

Better to ask your CPA/Tax professional.

[@NdEric-yl1tq]

Thx for amazing information!! So just to make sure, let's assume that the business was not open for the whole December up until January 3rd, the LLC does not need to pay the frachise Tax and it is only allowed once, is that correct?

[@LegalTipsForSmartEntrepreneurs]

Depends on what you mean by "not open for the whole of december." You need to have a tax year of less than 15 days and do no business to take advantage of this rule. This usually means creating the LLC or corp around Dec 17. See mor here www.ftb.ca.gov/about-ftb/newsroom/tax-news/december-2019/what-is-the-15-day-rule.html#:~:text=Since%20an%20entity%20that%20meets,close%20of%20the%20tax%20year.

[@AllBrightColors]

Helpful info. I was stressing about that $800+ fee. I think Ill just start as a sole proprietor and see how the business goes.

[@LegalTipsForSmartEntrepreneurs]

Might be a good plan!

[@RoxanaU.]

Hi! Thank you for this really informative video! I'm definitely subcribing. I had a quick question, I created an LLC and have to pay the 800$ fee that is due on the 4th month after registering. Unfortunately, I lost my job due to covid and was not able to pay it. I'm trying to cancel my LLC and now I'm super stressed because I don't know whats gonna happen now that I didn't pay it. Any advice helps, thank you!

[@RoxanaU.]

Also forgot to mention I did 0 business with the LLC so I have made no money from it.

[@danx.nguyenesq.8669]

Hi @@RoxanaU. you will still need to pay the $800 even if your LLC did no business. You should cancel the LLC soon so that you don't incur another $800 franchise tax for 2021.

[@LegalTipsForSmartEntrepreneurs]

@@RoxanaU. Was below helpful information?

[@RoxanaU.]

@@LegalTipsForSmartEntrepreneurs yes thank you so much! I have to figure out a way I’m so stressed it’s been late since Nov 15 so hopefully I can figure out a way. Thank you so much!!!

[@AllBrightColors]

@@danx.nguyenesq.8669 No WONDER businesses are leaving CA for other states!!

[@tupac209ful]

Llc or corporation for starting?

[@LegalTipsForSmartEntrepreneurs]

Depends on various factors, including what type of business you are in, financing structure, and management structure.

[@tupac209ful]

Home based businesses

[@LegalTipsForSmartEntrepreneurs]

@@tupac209ful need more information.

[@shaylamora1047]

How do I avoid it if I’m in the military

[@LegalTipsForSmartEntrepreneurs]

See www.ftb.ca.gov/forms/misc/3556.html#Deployed-Military-Exception Deployed Military Exception For taxable years beginning on or after: January 1, 2010, and before January 1, 2018 January 1, 2020, and before January 1, 2030 An LLC that is a small business solely owned by a deployed member of the United States Armed Forces shall not be subject to the annual tax if both of the following apply: The owner is deployed during the taxable year; and The LLC operates at a loss or ceases operation. LLCs exempt from the annual tax should print "Deployed Military" in black or blue ink in the top margin of the tax return. For the purposes of this exemption: "Deployed" means being called to active duty or active service during a period when the United States is engaged in combat or homeland defense. "Deployed" does not include either of the following: Temporary duty for the sole purpose of training or processing A permanent change of station. "Operates at a loss" means an LLC’s expenses exceed its receipts. "Small business" means an LLC with two hundred fifty thousand dollars ($250,000) or less of total income from all sources derived from or attributable to California.

[@sawyerrescue530]

What do I do if I’m a nonprofit

[@LegalTipsForSmartEntrepreneurs]

I believe this depends on your gross receipts.