5 ms·

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.
    - twohlix_ 9y ago
      From personal experience: Hiring your designer buddy who lives in San Diego while the two other guys in your company lives elsewhere entitles you to pay $800 a year in somewhat unexpected tax, even though you're not selling any services to any CA companies. Yea, jumped in feet first, but really did not enjoy the $800 bill that came with it.
      - dragonwriter 9y ago
        > From personal experience: Hiring your designer buddy who lives in San Diego while the two other guys in your company lives elsewhere entitles you to pay $800 a year in somewhat unexpected tax, even though you're not selling any services to any CA companies No, it doesn't, you can do that as a sole prop or (non-LLP) partnership, and not pay the $800 tax applied to corporations, LLPs, and LLCs. Asking the public at large to absorb for you (by granting you a personal liability shield) the risk that that the resources you give to the business plus those it is able to earn will not be able to meet the businesses liabilities is what you pay the $800 for. Which is why only the limited liability entities pay the tax.
    - dragonwriter 9y ago
      > $800 to obtain the privilege of operating in one of the world’s largest economies seems like a bargain to me. It might be, but that's not what the tax is for. The $800 tax applied to LLPs, LLCs, and corporations isn't a tax on the privilege of operating a business in California: sole props and non-limited-liabilty partnerships can operate as businesses in California and don't pay the tax. The privilege you pay for with the tax is that of offloading business failure risk onto the public while protecting your own personal assets with a publicly granted corporate liability shield.
  - dragonwriter 9y ago
    Many small businesses start out as sole proprietorships or general partnerships that don't pay the tax for the privilege of a corporate-style liability shield for investors that applies to LLCs, LLPs, and corporations. They often convert to an LLC or corporation if they scale beyond a very small operation, because at any but the smallest scale $800/year is nothing (it's less than the wages—not total cost—of a full time minimum wage employee in the state for two weeks.) But, you only need to start that way when you have or are seeking early investors that are protecting substantial assets outside the business; lots of people starting a small business sink most of their personal assets into them initially anyway, so the corporate liability shield isn't protecting anything: if the business fails, they are personally wiped out with or without it, and their exposure is limited more by personal bankruptcy than anything else.
- briandear 9y ago
  What’s the benefit to the business of that $800 fee? Why is it almost 4 times more than Delaware? Do I get a nice engraved plaque or something? I am being serious: WHY does it cost $800 just to exist?
  - neo4sure 9y ago
    No, you get to do business in the 6th largest economy in the world. If you don't like it don't do any business here.
    - deleted 9y ago
      [deleted]
    - homero 9y ago
      There's a few businesses I wanted to try but paying $800 was absurd so I forgot it
      - jjeaff 9y ago
        You do know you don't have to form an LLC to try out a business? Just got for it as a sole proprietorship and file an LLC later if it starts working.
        homero 9y ago
        No you can get sued pretty quick
        jjeaff 8y ago
        And when you are sued, your one man, tiny operation LLC will offer essentially zero protection. Unless you are selling parachutes to base jumpers, you'll be fine.
    - exclusiv 9y ago
      That type of thinking has pushed entrepreneurs and businesses to move to more friendly and competitive states. It's simply a bad policy to start aspiring small businesses in debt. $800 isn't much to many of us on here but it is for a lot of people that want to be entrepreneurs in different fields from different backgrounds. Most businesses have other startup costs as well. California already has the highest state income taxes. The privilege of doing business here is already accounted for. The franchise tax fee is just a bad policy and it's regressive.
- Karishma1234 9y ago
  > If you can't come up with US $800 a year to pay a business tax That is not only condescending but also insulting to people who are working very hard to just survive. I would respectfully request you to come down from your ivory tower of tech employment and notice the small people. My brother has an LLC and does landscaping. After paying all sort of bills and liabilities his company made $4K profits last year. $800 is pretty big amount compared to those profits. The profits might look negligible but he was able to employ 2-3 people on hourly wages, invest in buying a vehicle, equipment and so on. When we talk about inequality we should realise that $800 flat tax hurts the poorest of poor lot more than people like you and me. This eventually adds up into making poor people even more miserable than rich people. It could have been lot more sensible to say don't pay any taxes if you are making less than $20K profits. That would help poor people more. I am not saying this about you but I come across so many people in tech industry who claim to have bleeding heart for poor and yet are totally ignorant of reality of poor people.

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.
  - twohlix_ 9y ago
    From personal experience: Hiring your designer buddy who lives in San Diego while the two other guys in your company lives elsewhere entitles you to pay $800 a year in somewhat unexpected tax, even though you're not selling any services to any CA companies. Yea, jumped in feet first, but really did not enjoy the $800 bill that came with it.
    - dragonwriter 9y ago
      > From personal experience: Hiring your designer buddy who lives in San Diego while the two other guys in your company lives elsewhere entitles you to pay $800 a year in somewhat unexpected tax, even though you're not selling any services to any CA companies No, it doesn't, you can do that as a sole prop or (non-LLP) partnership, and not pay the $800 tax applied to corporations, LLPs, and LLCs. Asking the public at large to absorb for you (by granting you a personal liability shield) the risk that that the resources you give to the business plus those it is able to earn will not be able to meet the businesses liabilities is what you pay the $800 for. Which is why only the limited liability entities pay the tax.
  - dragonwriter 9y ago
    > $800 to obtain the privilege of operating in one of the world’s largest economies seems like a bargain to me. It might be, but that's not what the tax is for. The $800 tax applied to LLPs, LLCs, and corporations isn't a tax on the privilege of operating a business in California: sole props and non-limited-liabilty partnerships can operate as businesses in California and don't pay the tax. The privilege you pay for with the tax is that of offloading business failure risk onto the public while protecting your own personal assets with a publicly granted corporate liability shield.
- dragonwriter 9y ago
  Many small businesses start out as sole proprietorships or general partnerships that don't pay the tax for the privilege of a corporate-style liability shield for investors that applies to LLCs, LLPs, and corporations. They often convert to an LLC or corporation if they scale beyond a very small operation, because at any but the smallest scale $800/year is nothing (it's less than the wages—not total cost—of a full time minimum wage employee in the state for two weeks.) But, you only need to start that way when you have or are seeking early investors that are protecting substantial assets outside the business; lots of people starting a small business sink most of their personal assets into them initially anyway, so the corporate liability shield isn't protecting anything: if the business fails, they are personally wiped out with or without it, and their exposure is limited more by personal bankruptcy than anything else.
briandear 9y ago
What’s the benefit to the business of that $800 fee? Why is it almost 4 times more than Delaware? Do I get a nice engraved plaque or something? I am being serious: WHY does it cost $800 just to exist?
- neo4sure 9y ago
  No, you get to do business in the 6th largest economy in the world. If you don't like it don't do any business here.
  - deleted 9y ago
    [deleted]
  - homero 9y ago
    There's a few businesses I wanted to try but paying $800 was absurd so I forgot it
    - jjeaff 9y ago
      You do know you don't have to form an LLC to try out a business? Just got for it as a sole proprietorship and file an LLC later if it starts working.
      - homero 9y ago
        No you can get sued pretty quick
        jjeaff 8y ago
        And when you are sued, your one man, tiny operation LLC will offer essentially zero protection. Unless you are selling parachutes to base jumpers, you'll be fine.
  - exclusiv 9y ago
    That type of thinking has pushed entrepreneurs and businesses to move to more friendly and competitive states. It's simply a bad policy to start aspiring small businesses in debt. $800 isn't much to many of us on here but it is for a lot of people that want to be entrepreneurs in different fields from different backgrounds. Most businesses have other startup costs as well. California already has the highest state income taxes. The privilege of doing business here is already accounted for. The franchise tax fee is just a bad policy and it's regressive.
Karishma1234 9y ago
> If you can't come up with US $800 a year to pay a business tax That is not only condescending but also insulting to people who are working very hard to just survive. I would respectfully request you to come down from your ivory tower of tech employment and notice the small people. My brother has an LLC and does landscaping. After paying all sort of bills and liabilities his company made $4K profits last year. $800 is pretty big amount compared to those profits. The profits might look negligible but he was able to employ 2-3 people on hourly wages, invest in buying a vehicle, equipment and so on. When we talk about inequality we should realise that $800 flat tax hurts the poorest of poor lot more than people like you and me. This eventually adds up into making poor people even more miserable than rich people. It could have been lot more sensible to say don't pay any taxes if you are making less than $20K profits. That would help poor people more. I am not saying this about you but I come across so many people in tech industry who claim to have bleeding heart for poor and yet are totally ignorant of reality of poor people.