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How to form a California LLC without a lawyer

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Re: How to form a California LLC without a lawyer

#31

Post by nkozyra »

xur17 wrote: post #16
inoffensivename wrote: post #13

You also need to file a California Form 568 tax return with the Franchise Tax Board and pay the $800 annual tax whether or not you have any income, or you get a big fine that increases every month you don't file... Ask me how I know :)

> pay the $800 annual fee whether or not you have any income Really? In the 2 states I've lived in, there is no annual fee for LLC's. I'm curious what the reasoning behind having a fee that large is.

I'm surprised. I've had two in Florida and both had annual report fees ~ $150.

But if you don't pay your LLC just goes defunct. Making it a mandatory fee you can't escape kind of flies in the face of the whole point of an llc

Re: How to form a California LLC without a lawyer

#32

Post by smabie »

koolba wrote: post #17
flowerlad wrote: post #2

Cheaper to register in Delaware. Only $300 per year in LLC tax vs $800.

If you live in CA and you’re going to cheat the taxman by not registering locally as a foreign corporation, then you might as well register as an Ohio LLC. $99 initial registration and zero annual fee to maintain it.

Delaware courts are very business friendly, so it usually makes sense to register there, even if it's more expensive than other states.

Re: How to form a California LLC without a lawyer

#33

Post by anon9001 »

koolba wrote: post #17
flowerlad wrote: post #2

Cheaper to register in Delaware. Only $300 per year in LLC tax vs $800.

If you live in CA and you’re going to cheat the taxman by not registering locally as a foreign corporation, then you might as well register as an Ohio LLC. $99 initial registration and zero annual fee to maintain it.

Sure, Ohio is nice because it has no fees and no reporting requirements for $99. But why stop there when you can go to Arizona and get the same deal for $50.

But seriously, if you want to cheat California, just leave and move to a more business-friendly state and do your business legally. It's 100% not worth it to operate illegally in California, especially for the registration of an entity that's intended to protect you legally.

Oh, also fun, don't forget to explicitly close out your CA business when you finally give up and move out. If you don't, they'll hunt you down for your $800/yr several years later with penalties and interest.

Re: How to form a California LLC without a lawyer

#34

Post by dboreham »

protomyth wrote: post #28
mproud wrote: post #18

Earlier quoted context omitted.

In Minnesota, you pay a one time fee of $135, and renew yearly for free.

Yep, and the renewal takes about 5 minutes online. North Dakota charges $100 then $25 for each annual report. Odd, ND is more expensive.

$25 in MT also.

Re: How to form a California LLC without a lawyer

#36

Post by protomyth »

dboreham wrote: post #34
protomyth wrote: post #28

Earlier quoted context omitted.

Yep, and the renewal takes about 5 minutes online. North Dakota charges $100 then $25 for each annual report. Odd, ND is more expensive.

$25 in MT also.

Holy crud, South Dakota is $150 with $50 annual fee. I am stunned Minnesota is the cheapest option of the four states.

Re: How to form a California LLC without a lawyer

#37

Post by m463 »

bmiller2 wrote: post #22
xur17 wrote: post #16

Earlier quoted context omitted.

> pay the $800 annual fee whether or not you have any income Really? In the 2 states I've lived in, there is no annual fee for LLC's. I'm curious what the reasoning behind having a fee that large is.

If California can tax it, oh they will tax it.

tax what you want less of.

Re: How to form a California LLC without a lawyer

#38

Post by Stratoscope »

I have a California LLC and wish I didn't. It has been nothing but an albatross around my neck. I am almost certain I will shut it down at the end of this year.

Look, if you're reading articles like this one, don't do it. Just don't do it. Get competent legal and accounting advice first.

I formed my LLC four years ago when an interesting contracting project came my way. I'd worked as a 1099/Schedule C contractor in the past, but this client wanted me to have an LLC. OK, no big deal.

Then it turned out they also required the LLC to be taxed as an S Corp. No big deal there either, it's a simple IRS form to make that election.

Now guess what? You have to start filing 1120S corporate taxes plus the California equivalent. All the LLC/S Corp income flows right through onto your personal tax return, but you also get to get to file 940 and 941 payroll tax forms and the state equivalents.

And whether your LLC is taxed as an S Corp or not, you have to pay the $800/year California minimum tax on it. Yes, even though the LLC/S Corp really has no net income of its own (as it all flows into your personal tax return), you will owe that $800/year. Even if you create your LLC in another state.

Do not try to do this yourself. You will get it wrong and will pay many thousands of dollars in penalties as I have.

I finally realized I would be much better off just working for another company and letting them deal with all these headaches. They have an entire team to deal with it! If I had a time machine, I would have stuck with regular employment instead of thinking of myself as an independent business.

Forget about the fabled "corporate veil". If the IRS and FTB decide they want their money, they are going to get it.

If you do think this still sounds like a good idea, you must use a payroll service to pay yourself. After my initial fiasco of trying to do it myself, I started using Gusto [1] and they are pretty great.

For filing the LLC itself, I used SunDoc Filings [2] and they are really good too. They helped me on very short notice when I made a mistake on my LLC filing that would have caused it to be rejected.

But really, think twice, or a dozen times, before you open this can of worms.

Sorry for all the italics. :-) But this is something where I have some painful experience, and if I can help steer people away from it I hope it will be helpful.

[1] https://gusto.com/

[2] https://www.sundocumentfilings.com/

Re: How to form a California LLC without a lawyer

#39

Post by CameronNemo »

stillmotion wrote: post #3
flowerlad wrote: post #2

Cheaper to register in Delaware. Only $300 per year in LLC tax vs $800.

You still have to pay a minimum of $800 a year to the franchise tax board for operating a non-Californian business.

If you own the LLC but don't take a salary, do you still have to pay the fee?

Re: How to form a California LLC without a lawyer

#40

Post by Stratoscope »

JumpCrisscross wrote: post #29
Stratoscope wrote: post #24

Earlier quoted context omitted.

If you're in California, they will get their $800 regardless. It doesn't matter where you create the LLC, California has a minimum $800 tax on it.

> they will get their $800 regardless California law is convoluted and Californian courts slow. That makes doing almost everything with a California LLC more expensive than with a Delaware LLC. The only reason to form a California entity is if you’re doing business with the state.

If you live and work in California, you are doing business with the state. You aren't going to avoid that, no matter how hard you try.
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