To set up an LLC is no easy task, but once it’s operating how do you keep your LLC compliant in California?
Business permits and licences
Your LLC can only operate if you comply with federal, state and local government regulations. Ensuring that you have the correct business permits and licences for your LLC is crucial to maintaining your LLC in California. The details, specific requirements and fees of your LLC’s business permits and licences vary from state to state and also depend on the type of licence you are trying to obtain. To find out more about the specific requirements of a California LCC, and for more information on permits, licences and registration you can visit the State of California’s CalGold website. To learn more about how to comply with federal permits and licences you can also visit the U.S Small Businesses Administration (SBA) guide. You can also contact your local county clerk and inquire about local business permits and licences.
Updating your biennial statement and the associated fees
All LLCs in California are required to file a biennial statement, also known as a Statement of Information, with the California Secretary of State. This can be done online, by mail or in-person. Your biennial statement should be updated and filed every second year by the end of the month in which your LLC was formed. For every biennial statement filed the fee is a nonrefundable $20; failure to comply by filing your biennial statement later than the stipulated time can also result in a $250 penalty.
Franchise tax
California LLCs are also required to pay annual Franchise Tax, which can also be done online through the California Franchise Tax Board or by mail by writing a check or money order payable to the ‘Franchise Tax Board’ along with your Estimated Fees Form. Your LLC’s franchise tax is dependent on your LLC’s annual income. The tax calculation for LLCs with an annual revenue of less than $250,000 is $800. If your LLC’s annual revenue is more than $250,000, your franchise tax will total to $800 plus an additional Estimated Fee that is calculated in relation to your LLC’s annual revenue.
Compiling with state and federal tax requirements for LLCs in California
As an LLC owner, you may need to register for one or more state tax forms. The amount of different state tax forms that you would need to register for is dependent on the nature of your business as well as the sector in which your LLC operates. Let’s say your LLC sells a physical product, you would then need to register for a seller’s permit on the California state website. This certificate would in essence allow your LLC to file for and collect sales tax on taxable sales. Sales tax, also known as ‘Sales and Use Tax’, is a tax levied on business transactions that involve the exchange of goods and services. Another type of state tax that LLCs in California need to register for is Employer Taxes. You can register for California Employer Tax on the California Payroll website and includes Employee Withholding Tax, Unemployment Insurance Tax and Disability Insurance Tax.
Federal LLC tax requirements must also be considered in order to maintain your LLC in California. Most California LLCs are required to report their income to the IRS each year. Be sure to file the correct form as single-member LLCs tend to file different forms than the one used by multi-member LLCs. It is also important to remember that how you pay yourself, as an owner, will affect your federal taxes. You can find out more about how to pay yourself on TRUiC’s website.
The most important: avoid automatic dissolution
One of most important things to remember when maintaining your LLC in California is to avoid automatic dissolution. LLCs in California can face automatic dissolution, and to a lesser extent receive fines, when one or more state filings are missed. Make sure this does not happen and follow TRUiC’s guidelines to keep your LLC compliant.
