How To Start An LLC In California - Tax Implications (Part 1 of 2)

[@joshthefilmmaker9576]

Best video on starting an LLC! You literally saved my business. Very informative with much details. Thank you!

[@egod7m995]

Thanks for the information

[@norbertmazorra1012]

Hi Alexander In the case of the LLC Fee, for a business that buys the items for $5 and sells them for $7 ($2 profit), the LLC Fee is calculated on the $7 or on the $2? Thank you

[@EfrosFinancial]

Hello, For CA state income tax purposes, the annual LLC tax and annual LLC fee are calculated based on gross receipts and NOT net income. Accordingly, in your example, the annual LLC tax and annual LLC fee would be calculated based on the $7.00 gross receipts amount as opposed to the $2.00 profit amount. This assumed that the S-Corporation election was not made with respect to the LLC. Hope this helps. :)

[@norbertmazorra1012]

@@EfrosFinancial Thank you for your answer and help. I know I will be learning from your other videos but (and since you mentioned it) If I decide to file taxes with the S-Corp election the change here will be from the LLC Fee to the S-Corp fee?

[@sup3rdinho]

Your video kicks ass and the music at the end rocks hard ha

[@ajaviles13]

Dang this was insanely helpful! Thanks!

[@elijahperalta3652]

I desperately need that spreadsheet :) your videos have been very informative, thanks!

[@GeniShow]

Thank you so much

[@geronimosandoval5050]

Alex thank you for braking the steps down the way you did. It maid the filling process and fees a simple task. Ones again thanks.

[@SumnandOh]

dope video the music at the end is what got a dislike from me

[@HammerMnettaor]

Alex, awesome Video. I plan to use this to help file for my LLC, real soon. Question, I assume the spreadsheet you used is a product you keep in house, or for paying clients? Or is it a free document you are willing to provide?

[@rollingsunset357]

Alex, I have watch your video series on LLC's and S Corp in California. Through these videos I gain clarity on this topic. Thank you for providing this information! Now, can you do an educational video on California SB 85 that expands the Minimum Franchise Tax Exemption for LLC's for 2020-2026. How would one go about requesting that exemption?

[@EfrosFinancial]

Hello there -- you're welcome! Thank you for your feedback. Per review of the website for the California Legislature (leginfo.legislature.ca.gov/faces/billStatusClient.xhtml?bill_id=201920200AB85), my understanding is that California AB (not SB) 85 did not yet pass and is therefore not applicable at this time. If it does indeed pass, then I would be glad to make a video about the provisions which would impact LLCs and/or corporations doing business in the state of CA.

[@rollingsunset357]

@@EfrosFinancial Thank you for your reply. You are correct it is AB 85. Gov Newsome has signed it into law. It takes effect Jan 1, 2021. I guess I will have to wait until Dec 17th to file my LLC using the the 15 day rule. www.leginfo.legislature.ca.gov/faces/billCompareClient.xhtml?bill_id=201920200AB85&showamends=false

[@EfrosFinancial]

Hello again. Thank you for the information -- you are correct! California AB 85 did pass and will affect CA LLCs starting in tax year 2021. More information regarding the applicable changes may be found here: eminutes.com/forming-a-california-llc-new-tax-exemption-starts-in-2021. Specific to your comment, please note the following from the article linked above: "As it currently stands, the exemption only applies to LLCs, LLPs, and LPs that are formed or registered to do business in California “on or after January 1, 2021, and before January 1, 2024,” that is, during the years 2021, 2022, and 2023.[9] Therefore, while we generally advise entrepreneurs wishing to form a new corporation in California at the end of the year to do so during the last 15 days of the year to take full advantage of the exemption from paying the $800 minimum annual franchise tax during their first year in business, entrepreneurs wishing to form a business entity other than a corporation at the end of this year should actually wait until after the New Year to have the benefit of the same tax exemption that was previously unavailable to them. By waiting just a few days or weeks, the entrepreneur will save $800 in start-up costs, just as the Legislature intended." Accordingly, given the changes brought forth by California AB 85, you may want to wait until the beginning of tax year 2021 to form your LLC instead of taking advantage of the 15-day rule in tax year 2020 as you would avoid the $800.00 minimum annual tax for tax year 2021 as a whole.

[@BCIkim]

is there a way to purchase or get your spreadsheet??

[@radhikapatel3308]

So, if my understanding is correct, if I were to make BELOW $250,000 as a photography biz, would I be exempt from paying the additional LLC fee on top of the $800 annual taxes? I'm just making sure I understand this correctly before making a huge costly mistake.

[@EfrosFinancial]

Hello Radhika. Yes, that is correct. If gross receipts are $250,000 or higher, then an LLC is subject to both the $800 annual LLC TAX and the $900 annual LLC FEE at a minimum -- the total amount of the annual LLC FEE depends on the total gross receipts for the LLC for a particular tax year. More information is available here: www.ftb.ca.gov/file/business/types/limited-liability-company/index.html

[@radhikapatel3308]

@@EfrosFinancial Thank you! One more question. After paying the $800 in annual taxes (let's say I paid November 2020). When tax season comes around April 2021, am I subject to pay another round of annual taxes that April of 2021? Or would it be just income taxes owed based on my business income? Reason I ask is because I spoke with an SBA rep over the phone, and it was just so much information packed into this 1 hour phone call. I just want to make sure I didn't misinterpret any info. Thanks again!

[@ralpven]

Hello, I hope you are well. I appreciate your video, I have seen it twice but I still have a question. I have a sole propietor business in California, I pay a lot of self employment tax and some person recommended me to open an LLC. but I have doubts about what would be better. wait until January 2021 to open the LLC? Or open the LLC now because even though I would pay $ 800 in fee, on the other hand, I would pay less self employment tax for the remaining months of the year? that it will be the best??? thanks in advance I know that you do not give legal advice but I will appreciate any idea. Thanks

[@EfrosFinancial]

Hello Alejandro -- thank you for your question! To clarify, forming an LLC will not change the amount of self-employment taxes that you owe in a particular tax year. Accordingly, the main differences between operating as an LLC as opposed to a sole proprietor are legal differences which should be discussed with an attorney (generally, limited liability is a benefit of starting an LLC). With that said, you will also need to consider the annual taxes and fees which apply to LLCs formed in/doing business in California.

[@ammadmalik5613]

Im living in California USA, But not US citizens, im on Vist Visa, but legal, how can i register my LLC

[@evilways9173]

People with a social security number only no visa

[@mrLIPshxTs]

Great video.. can u email that spreadsheet??

[@cobracommander4378]

Great info Mr Efros, I live in L.A. county I want to get an LLC for the soul purpose of getting business credit and funding, is this a good move Mr Efros?

[@EfrosFinancial]

Thank you for your question! Please note that an Limited Liability Company (LLC) with one owner is classified as a "disregarded entity" for income tax purposes. Accordingly, there are no income tax benefits inherent in operating as a single-member LLC as opposed to a sole proprietor (there may actually be additional costs and taxes involved with an LLC). Accordingly, the differences between operating a business as an LLC as opposed to a sole proprietor are legal differences (possible limited liability protection in some cases) and differences between lenders' respective lending requirements (some lenders may require a personal guarantee when lending to a business entity). Any legal implications, however, should be discussed with a qualified attorney.

[@Bizebob1679]

How can I change the address of my business

[@cdez88]

Business address can I use my own address for that part or the agent my business is at home

[@jaddenmp]

Yes, you can.