1. Doing Business in California
2. LLC Classification
3. Knowing the Correct Form to File
4. Automatic Extension
5. Annual Dues for LLCs in California
6. Penalties

California partnership tax return filing requirements are the tax return filing demands that California legally makes on businesses (or partnerships) that operate in its jurisdiction.

Doing Business in California

Limited liability companies in foreign countries or other states must register with the Secretary of State in order to legally do business in California. Although it's counterintuitive, the location where business is primarily being conducted doesn't matter. Instead, an LLC is considered to be doing business in California if either of these conditions is met:

  • The LLC is partnered with an LLC or a limited partnership that conducts business in California.
  • Any of the LLC's managers, shareholders, or agents are operating in California on behalf of the LLC.

LLC Classification

Any LLC that's owned by more than one person is classified as a partnership by default, while an LLC with just one owner is considered a disregarded entity. An LLC can, however, apply to be considered and taxed as a corporation.

The owner of a disregarded entity must report the LLC's expenses and revenue on their personal tax return. However, such an LLC still has to file a partial Form 568 and pay its annual tax with any other applicable fee. For more information on this, see the California Form 568 Booklet.

Knowing the Correct Form to File

Before trying to file a tax return, you have to find out what tax form is right for your organization. Aside from a few exceptions, LLCs categorized as partnerships should file Form 568, not Form 565.

LLCs can determine which form they should file based on how they file their state taxes. Under Section 23101 of Revenue and Taxation Code, all disregarded entities or partnerships doing business in California must file Form 568 for Limited Liability Company Return of Income and pay the yearly $800 tax and any other applicable fees. A company that wasn't incorporated in California, doesn't do business in California, and isn't subject to California's $800 annual tax but has a filing requirement in California must use Form 565 for Partnership Return of Income instead of Form 568.

An LLC that's legally operating as a corporation in California must file one of the following:

  • California Form 100 for Corporation Franchise or Income Tax Return.
  • California Form 100S for S Corporation Franchise or Income Tax Return.
  • California Form 100W for California Corporation Franchise or Income Tax Return-Water's-Edge Filers

After filing its return, the LLC must pay the required tax.

Automatic Extension

In California, your company doesn't need to apply for extensions. If the LLC's Form 568 can't be filed by the due date of the return, the LLC gets an automatic six-month extension, except the LLC is forfeited or suspended. The automatic extension, however, doesn't extend the time to pay other due fees or the taxes of nonresident shareholders.

Annual Dues for LLCs in California

Every LLC is required to pay a fee in addition to an annual tax if its total annual income is equal to or more than $250,000. Section 17942 of California's Revenue and Taxation Code requires California LLCs to pay an annual tax of $800 along with annual fees based on the amount of apportioned California gross receipts.

The range of the annual fee is between $0 (for apportioned gross receipts less than $250,000) and $11,790 (for apportioned gross receipts equal to or greater than $5 million). The annual fees and taxes are recorded on California State's Form 568 on the due date, which is the 15th of the fourth month after the close of the LLC's business year.

Penalties

The LLC will be penalized $18 for each member per month for as many as 12 months, but not more than that, if it fails to file its taxes annually. Additionally, the LLC is required to pay a late-filing fee of 5 percent per month for up to 25 percent of the unpaid tax and any applicable fees. An LLC conducting business in California that isn't registered or has legally lost its right to do so is required to pay a penalty of $2,000. There will be no penalties if an LLC keeps to due dates and pays its complete dues.

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