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In California, an LLC is treated like an S-Corp and you get charged the Corporate tax rate in addition to paying your regular income tax. Unless you feel the na

In California, an LLC is treated like an S-Corp and you get charged the Corporate tax rate in addition to paying your regular income tax. Unless you feel the name of your company requires the protection of an LLC and make enough to justify the 8.84% (minimum of $800) additional tax, skip it.

will_brown 12y ago
Allow me to expand on this a little: Anything an LLC pays as "regular income" is an expense to the LLC and is not taxable at the LLC level, with the exception that the LLC will have to pay payroll taxes. Of course the wage earner will pay both Federal and if applicable State income taxes. An LLC has flexible tax structure, and at the federal level may be taxed as: 1. a sole proprietorship; 2. a partnership; 3. a C-corporation; and 4. a S-corporation. An LLC may provide legal protection (limited liability) to its owners; however, that protection is generally lost when it is a single member (only a single owner) LLC. You are correct that the California franchise tax (minimum of $800 annually) is wildly expensive compared to annual compliance filing fees in other states.
dragonwriter 12y ago
An LLC with one member can choose to be treated as either a disregarded entity (sole proprietorship) or corporation for tax purposes, an LLC with more than one member can choose to be treated as either a partnership or a corporation for tax purposes. The default is disregarded entity or partnership (depending on whether the LLC has more than one member), and the election to be taxed instead as a corporation is made federally by filing with the IRS, the California tax treatment is based on how the LLC has chosen to be treated federally. https://www.ftb.ca.gov/businesses/bus_structures/LLCompany.shtml https://www.ftb.ca.gov/businesses/bus_structures/LLCompany.s...

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In California, an LLC is treated like an S-Corp and you get charged the Corporate tax rate in addition to paying your regular income tax. Unless you feel the na

by megaframe 12y ago

will_brown 12y ago
Allow me to expand on this a little: Anything an LLC pays as "regular income" is an expense to the LLC and is not taxable at the LLC level, with the exception that the LLC will have to pay payroll taxes. Of course the wage earner will pay both Federal and if applicable State income taxes. An LLC has flexible tax structure, and at the federal level may be taxed as: 1. a sole proprietorship; 2. a partnership; 3. a C-corporation; and 4. a S-corporation. An LLC may provide legal protection (limited liability) to its owners; however, that protection is generally lost when it is a single member (only a single owner) LLC. You are correct that the California franchise tax (minimum of $800 annually) is wildly expensive compared to annual compliance filing fees in other states.
dragonwriter 12y ago
An LLC with one member can choose to be treated as either a disregarded entity (sole proprietorship) or corporation for tax purposes, an LLC with more than one member can choose to be treated as either a partnership or a corporation for tax purposes. The default is disregarded entity or partnership (depending on whether the LLC has more than one member), and the election to be taxed instead as a corporation is made federally by filing with the IRS, the California tax treatment is based on how the LLC has chosen to be treated federally. https://www.ftb.ca.gov/businesses/bus_structures/LLCompany.shtml https://www.ftb.ca.gov/businesses/bus_structures/LLCompany.s...