Sam came into my office and proudly told me that he became an LLC last year! After congratulating him, I asked Sam why he chose to be an LLC? He said his neighbor told him it was a good idea. Next I asked him if he had paid his $800 to the Franchise Tax Board? He just blinked at me. Next I asked him if his attorney agreed that the LLC was enough liability protection for his business. He told me he went through Legal Zoom to prepare his LLC documents and never actually spoke to a real person.
By the end of the appointment, Sam realized that LLCs (Limited Liability Companies) in California have many responsibilities:
- Pay $800 minimum tax each year
- Pay additional fees if your Gross Receipts are $250,000 or more
- File Form 568 with the Franchise Tax Board
- File Statement of Information with Secretary of State every 2 years and pay a fee
- Maintain a formal legal separation between the LLC and the individual
We got Sam sorted out and he promised to never finalize a major business decision without calling me first!
Choosing the proper business entity for your business is a very important. We recommend that you speak to an attorney to understand your liability protection needs and the operational requirements, your insurance provider to see if an insurance policy can provide the protection you need at a lower cost, and finally your Enrolled Agent to understand what this entity is going to mean on your tax return.
At Cromwell Tax & Bookkeeping we can help you with business entity selection, filing your tax returns and payments to the Franchise Tax Board, and completing your business bookkeeping in a professional manner.