Key Takeaways

  • Partnerships in California typically file Form 565, while LLCs taxed as partnerships file Form 568.
  • Doing business in California can trigger tax obligations even without physical presence.
  • An automatic six-month extension applies to Form 565 and Form 568—but payment deadlines remain firm.
  • Annual LLC tax ($800) and gross receipts fees apply regardless of income for most LLCs.
  • Penalties for late filing, failure to register, and underpayment can be significant.
  • Out-of-state partnerships may still have California filing requirements if they derive income from California sources.

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.

California Form 565 Filing Requirements

Partnerships that are not classified as LLCs—such as general partnerships and limited partnerships—are required to file California Form 565, the Partnership Return of Income. Unlike LLCs taxed as partnerships, these entities are not subject to the $800 annual LLC tax but must still report income, deductions, and general partner information to the Franchise Tax Board (FTB).

Form 565 must be filed annually if the partnership:

  • Does business in California.
  • Has income derived from California sources.
  • Has a California-resident partner.

Although the partnership itself does not pay income tax, the filing ensures the correct pass-through of income to each partner, who then reports it individually on their state returns.

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.

Out-of-State Partnerships with California Source Income

Out-of-state partnerships that earn income from California sources—even without a physical presence in the state—may be required to file Form 565. These entities should be aware that:

  • California source income includes revenue generated from services performed in California, rental income from property located in the state, or sales derived from California-based customers.
  • If the partnership has a filing obligation but is not subject to the $800 annual tax (such as in the absence of nexus or a California LLC classification), Form 565 is the correct form.

Filing is still required even if the business does not maintain an office, employee, or warehouse in the state but meets thresholds for economic nexus under Revenue and Taxation Code Section 23101.

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.

Common Mistakes When Filing a California Partnership Return

Mistakes in filing a California partnership return can lead to penalties or additional scrutiny by the Franchise Tax Board. Common issues include:

  • Using the wrong form: LLCs often mistakenly file Form 565 instead of Form 568.
  • Missing deadlines: While there’s an automatic extension to file, payment deadlines are not extended.
  • Underestimating gross receipts: This affects whether additional LLC fees are due beyond the flat $800 annual tax.
  • Failing to register: Operating in California without registering can trigger a $2,000 penalty.
  • Ignoring nonresident partner withholding requirements: Partnerships with nonresident partners may have additional withholding and reporting duties.

Correct classification, timely filing, and accurate reporting are essential for maintaining compliance.

Frequently Asked Questions

  1. What form do California partnerships need to file?
    Partnerships must file Form 565 unless they are LLCs taxed as partnerships, in which case they file Form 568.
  2. Do out-of-state partnerships need to file in California?
    Yes, if they earn income from California sources or have California-resident partners, even without a physical presence.
  3. Is the $800 annual LLC tax required for all partnerships?
    No, it applies only to LLCs doing business in California, not general or limited partnerships.
  4. Can a partnership get an extension to file in California?
    Yes, an automatic six-month extension to file is granted, but taxes and fees are still due by the original deadline.
  5. What happens if I file the wrong form?
    Filing the wrong form can result in processing delays, penalties, and the need to refile using the correct return type.

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