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... and then get ready to be taxed into Bankruptcy. CA has 1 of the highest business taxes. LLCs have to pay the State $800 every year, even if your business i

... and then get ready to be taxed into Bankruptcy. CA has 1 of the highest business taxes. LLCs have to pay the State $800 every year, even if your business is losing money or has no revenue and even if you are a single-member LLC, in which case IRS regards it as a pass-through entity. On top of that, if you form your business in San Francisco, you are mandatory charged a 4% "Healthy San Francisco" city tax that is supposed to helps pay for employee's healthcare. > 2008 Health Care Security Ordinance, which provides health care to San Francisco residents without insurance (the Healthy San Francisco program) and requires businesses to help fund health care for their employees in San Francisco. Source: https://www.tripsavvy.com/restaurants-healthy-san-francisco-surcharges-2939548 https://www.tripsavvy.com/restaurants-healthy-san-francisco-... Restaurants were busted running a scam where they passed on this tax to the customer and pocketed the $$ themselves, but that's a whole different story (see Source link above).

zaksoup 9y ago
> ...taxed into Bankruptcy. Given that you're taxed on profits (reductive, I know) isn't this literally impossible? God forbid Californians value healthcare and that a city 45 minutes from the HQ of the richest company in the world, in the midst of a homelessness crisis, attempt to improve the lives of its at-risk citizens http://sfist.com/2017/06/26/2017_san_francisco_homeless_census.php http://sfist.com/2017/06/26/2017_san_francisco_homeless_cens...
- abritinthebay 9y ago
  It is impossible. He’s just repeating talking points he heard but does not understand.
  - manigandham 9y ago
    What is impossible? The minimum franchise tax? Are you sure that you understand? https://www.ftb.ca.gov/businesses/faq/712.shtml https://www.ftb.ca.gov/businesses/faq/712.shtml >> Minimum tax is the amount you must pay the first quarter of each accounting period whether the corporation is active, operates at a loss or does not do business. The current minimum tax is $800.
    - abritinthebay 9y ago
      "taxed into Bankruptcy" If you're not making $800 then you don't have a business - you have a hobby.
      - manigandham 9y ago
        There's no number on the amount of money you have to earn to be a business. Corporate structures can be useful even if they don't directly earn money. Either way, yes it's just a cost of doing business in California, and so profits need to be greater than the cost for the business to be sustainable. Perhaps it's not a great description to say "taxed into bankruptcy" but it's no different than "did not meet costs and ended in bankruptcy", with the costs specifically being taxes.
        abritinthebay 9y ago
        Sure, there is no minimum (tho it could be argued that $800 is the minimum tbh) but even if you only charge minumum wage ($11) that’s less than two weeks work. More likely the hourly equivalent will be a lot higher. A dog walker would make that in 4 days at worst. A week or two if they are casual ones. So to not make that it’s not the taxes that are killing your business.
- JumpCrisscross 9y ago
  Some Californian counties and cities [1] tax top line and fixed franchise/license taxes, irrespective of profitability. [1] https://www.sidley.com/en/insights/newsupdates/2013/09/phasein-of-new-san-francisco-gross-receipts-tax-and-business-registration-fee-to-begin-in-2014 https://www.sidley.com/en/insights/newsupdates/2013/09/phase...
  - gamblor956 9y ago
    Correction: Just San Francisco. It even says so in the linked page.
- eschutte2 9y ago
  The $800 "minimum tax" on LLCs and C-corps is assessed whether you have any revenue or not.
  - dlisboa 9y ago
    If you can't come up with US$ 800 a year to pay a business tax you're pretty much bankrupt already and it wasn't the tax that killed you.
    - m0llusk 9y ago
      That isn't true at all. Most small businesses start out extremely lean and at risk.
      - SlowBro 9y ago
        $800 to obtain the privilege of operating in one of the world’s largest economies seems like a bargain to me. Were I one of those small businesses I would find some way to get that funding. A loan, a credit card, something. There are plenty of reasons people want to be in CA to do business, and that’s not that big of an expense for the value of operating there, in my opinion. And by the way I’m not in agreement with most taxes; I am almost a Libertarian. I’m also not a Californian. I’m just saying, I think it’s not that big a deal in the grand scheme.
        geggam 9y ago
        Calling "starting a business" a privilege completely moves you very far away from the libertarian space.
        SlowBro 9y ago
        It’s the world we live in. Ask me personally what I think and I’ll tell you it’s a God-given right to start a business with little government mettling. In the real world, especially one largely run by statists, it’s considered a privilege. I'm using the language of statists because most people today are statists. It doesn't necessarily follow that I also personally agree with the idea, though I can see why you'd draw that conclusion.
- manigandham 9y ago
  Interesting how given the tax does exist, the city with the HQ of the richest company in the world is in a homelessness crisis in the first place. Perhaps these taxes are not actually useful?
  - vpribish 9y ago
    don't troll
    - manigandham 9y ago
      It's commentary on the situation existing and a question on whether the taxes are effective. Why the sensitivity and how is your post constructive?
  - zaksoup 9y ago
    Apple is registered in Delaware. Again, reductive, but as other commenters said... don’t troll.
    - manigandham 9y ago
      Why did you mention Apple in your comment then? Also operating in California means paying taxes in California and the minimum franchise tax is assessed regardless of corporate status or income: https://www.ftb.ca.gov/businesses/faq/712.shtml https://www.ftb.ca.gov/businesses/faq/712.shtml What is reductive about wondering why a situation that you outlined exists for decades when there are specific extra taxes to help battle it?
  - alchemism 9y ago
    Or mayhaps the tax rate is too low and should be much higher for them?
    - manigandham 9y ago
      For who? Also I'm asking about effectiveness, not necessarily the amount. If they are not useful unless they are at a certain amount, then what would that be and why aren't they at that level already? And wouldn't that just mean that anything below that level actually is useless if it doesn't meet the minimum needed to do anything?
komali2 9y ago
Turns out, providing a baseline of healthcare costs money. I'd rather restaurants didn't line-item it and just raise the cost of food (maybe they have to line-item it? not sure) but in either case I'm happy to pay extra given that when we weren't paying, it simply meant a bunch of people were wandering around playing healthcare bankruptcy roulette. I think there will be a lot of "growing pains" as businesses adjust to "actual cost of an employee." Typically my friends back in Texas make fun of me for this after my move to SF, then turn around demanding the removal of illegal immigrants... despite the fact that every one of their favorite restaurants out in Houston exists because of their ability to underpay unreported workers. I see very little difference (costs go up because employees actually get healthcare now vs costs go up because historically underpaid employees have to be paid at least minimum wage because they're reported now).
guelo 9y ago
Companies that do business in California must pay California taxes no matter where they are incorporated.
- shinymark 9y ago
  Correct. This fact seems misunderstood by many people but the rules are very clearly written.
- asdsa5325 9y ago
  Not the franchise tax.
  - mintplant 9y ago
    > All LLCs (not classified as a corporation) that are doing business in California, or file an article of organization or certificate of registration with the Secretary of State must file Form 568, Limited Liability Company Return of Income, pay the annual minimum franchise tax of $800, and LLC fee (if applicable). https://www.ftb.ca.gov/businesses/Structures/Limited-Liability-Company.shtml https://www.ftb.ca.gov/businesses/Structures/Limited-Liabili...
    - mark212 9y ago
      Yep. The limitation though is that a foreign entity only has to pay the tax on its California receipts. So if 10% of your $1 million annual profits are derived from California, you pay the 1.5% (min $800) on that $100,000 and not the whole thing. And btw that’s the rule in every state. They all want to tax whatever revenue is generated in that state (unless they don’t have a business tax at all, which is somewhat rare)
- 77pt77 9y ago
  Define do business. If an LLC, say software services, incorporated in DE provides some consulting to a firm in California, that counts?
  - 9y ago
gamblor956 9y ago
CA has 1 of the highest business taxes. If you want to do business in California, you will be paying that tax whether you register in California or another state. Consequently, if you're in California there's no reason to consider exposing yourself to the jurisdiction of another state.
- evbots 9y ago
  You mind find the "startup mechanics" video from YC's startup school 2017 pretty interesting. The case is made that resolving disputes in Delaware (by being incorporated in Delaware) is greatly preferred to any other state (CA for example).
  - misterbwong 9y ago
    IIRC it is generally preferable to incorporate in DE for dispute resolution but doing so does not exempt you from paying CA taxes & fees. You will still need to pay the minimum tax amount if you are doing business in CA.
    - evbots 9y ago
      Agreed.
    - exclusiv 9y ago
      Yes this is correct. I have an LLC in Nevada and I still have to register an LLC in California because I live and work here. It's a foreign LLC entity.
      - 77pt77 9y ago
        Could you expand on that? I really don't understand.
        jjeaff 9y ago
        In this case, a foreign entity is an LLC that is registered in another state, but does enough business in CA to require registering in CA. In this case you register as a "foreign entity".
briandear 9y ago
Funny though.. ALL taxes are passed to the customer. Businesses don’t pay taxes, customers do.
- colechristensen 9y ago
  Then customers don't pay taxes, their employers do. You can keep going around in circles adding another link to who pays pointing to where they got their money. Saying anyone else but the entity signing the check pays a tax gets silly. The only time you can dispute this is when the tax is directly on an activity that requires two participants. Who pays sales tax, the buyer or the seller?
  - blackbagboys 9y ago
    This is in fact not an irresolvable metaphysical dispute but an introductory undergraduate economics problem, and the answer is that it depends on the elasticity of the market.
- leetcrew 9y ago
  tax incidence is not nearly as simple as you are making it out to be. how much the tax cuts into the business's surplus vs the customer's totally depends on the situation.
abalone 9y ago
> On top of that, if you form your business in San Francisco, you are mandatory charged a 4% "Healthy San Francisco" city tax that is supposed to helps pay for employee's healthcare. This is misleading right-wing B.S. This only kicks in once you employ 20 or more people.[1] Anyone reading this on HN, if they eventually do employ 20 people, probably would want to offer them health insurance by that time. [1] http://sfcityoption.org/hcso-compliance/employer-spending-requirement-esr/ http://sfcityoption.org/hcso-compliance/employer-spending-re...
- jdpedrie 9y ago
  What makes it right or left wing bs? Can't it just be an incorrect statement? It could just be me, but I didn't detect any political undertones to the parent comment.
  - webbles 9y ago
    It isn't incorrect it is misleading. The way in which it is misleading is the reason it is considered right wing bs. You didn't detect it, because it was designed to be misleading. You need to wake up and realize that this happens literally all the time today.
  - abalone 9y ago
    Misrepresenting the taxation level and/or financial solvency of California is a regular right-wing trope, targeting the general attitude that governments should provide social services.
- justboxing 9y ago
  > This is misleading right-wing B.S. LOL. No. I campaigned for Barack Obama and met him in 2008. That's how 'right wing' I am. > Anyone reading this on HN, if they eventually do employ 20 people, probably would want to offer them health insurance by that time. That's a benevolent attitude, but practically, it will drive your business bankrupt if you are paying the CA-rate health care costs. That's the single biggest reason why even big corps like Wells Fargo, Charles Schwab and Bank of America are relocating many of their employees to Arizona and Colorado and elsewhere.
nodesocket 9y ago
I just recently moved and also moved my single member California LLC to a single member Tennessee LLC. While there is NO INCOME TAX in the beautiful state of Tennessee, it still costs around $400 a year to register the LLC in Tennessee. So not a huge savings over the $800 LLC fee in California.

zaksoup 9y ago

> ...taxed into Bankruptcy. Given that you're taxed on profits (reductive, I know) isn't this literally impossible? God forbid Californians value healthcare and that a city 45 minutes from the HQ of the richest company in the world, in the midst of a homelessness crisis, attempt to improve the lives of its at-risk citizens http://sfist.com/2017/06/26/2017_san_francisco_homeless_census.php http://sfist.com/2017/06/26/2017_san_francisco_homeless_cens...

abritinthebay 9y ago
It is impossible. He’s just repeating talking points he heard but does not understand.
- manigandham 9y ago
  What is impossible? The minimum franchise tax? Are you sure that you understand? https://www.ftb.ca.gov/businesses/faq/712.shtml https://www.ftb.ca.gov/businesses/faq/712.shtml >> Minimum tax is the amount you must pay the first quarter of each accounting period whether the corporation is active, operates at a loss or does not do business. The current minimum tax is $800.
  - abritinthebay 9y ago
    "taxed into Bankruptcy" If you're not making $800 then you don't have a business - you have a hobby.
    - manigandham 9y ago
      There's no number on the amount of money you have to earn to be a business. Corporate structures can be useful even if they don't directly earn money. Either way, yes it's just a cost of doing business in California, and so profits need to be greater than the cost for the business to be sustainable. Perhaps it's not a great description to say "taxed into bankruptcy" but it's no different than "did not meet costs and ended in bankruptcy", with the costs specifically being taxes.
      - abritinthebay 9y ago
        Sure, there is no minimum (tho it could be argued that $800 is the minimum tbh) but even if you only charge minumum wage ($11) that’s less than two weeks work. More likely the hourly equivalent will be a lot higher. A dog walker would make that in 4 days at worst. A week or two if they are casual ones. So to not make that it’s not the taxes that are killing your business.
JumpCrisscross 9y ago
Some Californian counties and cities [1] tax top line and fixed franchise/license taxes, irrespective of profitability. [1] https://www.sidley.com/en/insights/newsupdates/2013/09/phasein-of-new-san-francisco-gross-receipts-tax-and-business-registration-fee-to-begin-in-2014 https://www.sidley.com/en/insights/newsupdates/2013/09/phase...
- gamblor956 9y ago
  Correction: Just San Francisco. It even says so in the linked page.
eschutte2 9y ago
The $800 "minimum tax" on LLCs and C-corps is assessed whether you have any revenue or not.
- dlisboa 9y ago
  If you can't come up with US$ 800 a year to pay a business tax you're pretty much bankrupt already and it wasn't the tax that killed you.
  - m0llusk 9y ago
    That isn't true at all. Most small businesses start out extremely lean and at risk.
    - SlowBro 9y ago
      $800 to obtain the privilege of operating in one of the world’s largest economies seems like a bargain to me. Were I one of those small businesses I would find some way to get that funding. A loan, a credit card, something. There are plenty of reasons people want to be in CA to do business, and that’s not that big of an expense for the value of operating there, in my opinion. And by the way I’m not in agreement with most taxes; I am almost a Libertarian. I’m also not a Californian. I’m just saying, I think it’s not that big a deal in the grand scheme.
      - geggam 9y ago
        Calling "starting a business" a privilege completely moves you very far away from the libertarian space.
        SlowBro 9y ago
        It’s the world we live in. Ask me personally what I think and I’ll tell you it’s a God-given right to start a business with little government mettling. In the real world, especially one largely run by statists, it’s considered a privilege. I'm using the language of statists because most people today are statists. It doesn't necessarily follow that I also personally agree with the idea, though I can see why you'd draw that conclusion.
manigandham 9y ago
Interesting how given the tax does exist, the city with the HQ of the richest company in the world is in a homelessness crisis in the first place. Perhaps these taxes are not actually useful?
- vpribish 9y ago
  don't troll
  - manigandham 9y ago
    It's commentary on the situation existing and a question on whether the taxes are effective. Why the sensitivity and how is your post constructive?
- zaksoup 9y ago
  Apple is registered in Delaware. Again, reductive, but as other commenters said... don’t troll.
  - manigandham 9y ago
    Why did you mention Apple in your comment then? Also operating in California means paying taxes in California and the minimum franchise tax is assessed regardless of corporate status or income: https://www.ftb.ca.gov/businesses/faq/712.shtml https://www.ftb.ca.gov/businesses/faq/712.shtml What is reductive about wondering why a situation that you outlined exists for decades when there are specific extra taxes to help battle it?
- alchemism 9y ago
  Or mayhaps the tax rate is too low and should be much higher for them?
  - manigandham 9y ago
    For who? Also I'm asking about effectiveness, not necessarily the amount. If they are not useful unless they are at a certain amount, then what would that be and why aren't they at that level already? And wouldn't that just mean that anything below that level actually is useless if it doesn't meet the minimum needed to do anything?

komali2 9y ago

Turns out, providing a baseline of healthcare costs money. I'd rather restaurants didn't line-item it and just raise the cost of food (maybe they have to line-item it? not sure) but in either case I'm happy to pay extra given that when we weren't paying, it simply meant a bunch of people were wandering around playing healthcare bankruptcy roulette. I think there will be a lot of "growing pains" as businesses adjust to "actual cost of an employee." Typically my friends back in Texas make fun of me for this after my move to SF, then turn around demanding the removal of illegal immigrants... despite the fact that every one of their favorite restaurants out in Houston exists because of their ability to underpay unreported workers. I see very little difference (costs go up because employees actually get healthcare now vs costs go up because historically underpaid employees have to be paid at least minimum wage because they're reported now).

guelo 9y ago

Companies that do business in California must pay California taxes no matter where they are incorporated.

shinymark 9y ago
Correct. This fact seems misunderstood by many people but the rules are very clearly written.
asdsa5325 9y ago
Not the franchise tax.
- mintplant 9y ago
  > All LLCs (not classified as a corporation) that are doing business in California, or file an article of organization or certificate of registration with the Secretary of State must file Form 568, Limited Liability Company Return of Income, pay the annual minimum franchise tax of $800, and LLC fee (if applicable). https://www.ftb.ca.gov/businesses/Structures/Limited-Liability-Company.shtml https://www.ftb.ca.gov/businesses/Structures/Limited-Liabili...
  - mark212 9y ago
    Yep. The limitation though is that a foreign entity only has to pay the tax on its California receipts. So if 10% of your $1 million annual profits are derived from California, you pay the 1.5% (min $800) on that $100,000 and not the whole thing. And btw that’s the rule in every state. They all want to tax whatever revenue is generated in that state (unless they don’t have a business tax at all, which is somewhat rare)
77pt77 9y ago
Define do business. If an LLC, say software services, incorporated in DE provides some consulting to a firm in California, that counts?
- 9y ago

gamblor956 9y ago

CA has 1 of the highest business taxes. If you want to do business in California, you will be paying that tax whether you register in California or another state. Consequently, if you're in California there's no reason to consider exposing yourself to the jurisdiction of another state.

evbots 9y ago
You mind find the "startup mechanics" video from YC's startup school 2017 pretty interesting. The case is made that resolving disputes in Delaware (by being incorporated in Delaware) is greatly preferred to any other state (CA for example).
- misterbwong 9y ago
  IIRC it is generally preferable to incorporate in DE for dispute resolution but doing so does not exempt you from paying CA taxes & fees. You will still need to pay the minimum tax amount if you are doing business in CA.
  - evbots 9y ago
    Agreed.
  - exclusiv 9y ago
    Yes this is correct. I have an LLC in Nevada and I still have to register an LLC in California because I live and work here. It's a foreign LLC entity.
    - 77pt77 9y ago
      Could you expand on that? I really don't understand.
      - jjeaff 9y ago
        In this case, a foreign entity is an LLC that is registered in another state, but does enough business in CA to require registering in CA. In this case you register as a "foreign entity".

briandear 9y ago

Funny though.. ALL taxes are passed to the customer. Businesses don’t pay taxes, customers do.

colechristensen 9y ago
Then customers don't pay taxes, their employers do. You can keep going around in circles adding another link to who pays pointing to where they got their money. Saying anyone else but the entity signing the check pays a tax gets silly. The only time you can dispute this is when the tax is directly on an activity that requires two participants. Who pays sales tax, the buyer or the seller?
- blackbagboys 9y ago
  This is in fact not an irresolvable metaphysical dispute but an introductory undergraduate economics problem, and the answer is that it depends on the elasticity of the market.
leetcrew 9y ago
tax incidence is not nearly as simple as you are making it out to be. how much the tax cuts into the business's surplus vs the customer's totally depends on the situation.

abalone 9y ago

> On top of that, if you form your business in San Francisco, you are mandatory charged a 4% "Healthy San Francisco" city tax that is supposed to helps pay for employee's healthcare. This is misleading right-wing B.S. This only kicks in once you employ 20 or more people.[1] Anyone reading this on HN, if they eventually do employ 20 people, probably would want to offer them health insurance by that time. [1] http://sfcityoption.org/hcso-compliance/employer-spending-requirement-esr/ http://sfcityoption.org/hcso-compliance/employer-spending-re...

jdpedrie 9y ago
What makes it right or left wing bs? Can't it just be an incorrect statement? It could just be me, but I didn't detect any political undertones to the parent comment.
- webbles 9y ago
  It isn't incorrect it is misleading. The way in which it is misleading is the reason it is considered right wing bs. You didn't detect it, because it was designed to be misleading. You need to wake up and realize that this happens literally all the time today.
- abalone 9y ago
  Misrepresenting the taxation level and/or financial solvency of California is a regular right-wing trope, targeting the general attitude that governments should provide social services.
justboxing 9y ago
> This is misleading right-wing B.S. LOL. No. I campaigned for Barack Obama and met him in 2008. That's how 'right wing' I am. > Anyone reading this on HN, if they eventually do employ 20 people, probably would want to offer them health insurance by that time. That's a benevolent attitude, but practically, it will drive your business bankrupt if you are paying the CA-rate health care costs. That's the single biggest reason why even big corps like Wells Fargo, Charles Schwab and Bank of America are relocating many of their employees to Arizona and Colorado and elsewhere.

nodesocket 9y ago

I just recently moved and also moved my single member California LLC to a single member Tennessee LLC. While there is NO INCOME TAX in the beautiful state of Tennessee, it still costs around $400 a year to register the LLC in Tennessee. So not a huge savings over the $800 LLC fee in California.