We have written extensively on the benefits of LLCs for use in California real estate holdings. Now may be the best time ever to consider forming an LLC for your real estate, as the State of California is temporarily waiving both the initial filing fees and the first year’s minimum tax, for a total savings of $870.
Effective until June 30, 2023, California is waiving the traditional $70 filing fee to form a California Limited Liability Company, or “LLC.” The Processing Fee is now $0.00. The processing fee is waived for submissions submitted July 1, 2022 through June 30, 2023.
Even better – The annual minimum $800 tax to the California Franchise Tax Board is also waived for the first year. “For tax years beginning on or after January 1, 2021, and before January 1, 2024, LLCs that organize, register, or file with the Secretary of State to do business in California are not subject to the annual tax of $800 for their first tax year.”
That is an $870 savings for all new California LLCs. Any savings from the State of California to businesses is rare – or anything making it easier to do business in the State of California for that mater – so if you are forming an LLC in this timeframe, enjoy this modest business friendly benefit while it lasts.
Note the respective fee waiver dates do not match, so form your LLC before June 30, 2023 for the full savings, but enjoy the larger savings through the end of 2024.
When Are LLC Taxes And Fees Due?
Normally, the initial $70 formation fee is paid at the time of filing the articles of organization with the Secretary of State. A $20 fee is then due when filing the required Statement of Information.
The annual LLC tax is then due and payable by the 15th day of the 4th month after the beginning of the LLC’s taxable year (fiscal year) or April 15, 2022 (calendar year). The first taxable year of an LLC begins when the LLC files its articles of organization.
For example, if you formed a California LLC to hold your real estate on June 18, 2022, your annual LLC tax would have been due on September 15, 2022 (15th day of the 4th month), and then each April 15th thereafter (assuming you elect calendar year taxation, otherwise it is simply due on the 15th day of the 4th month of your taxable year).
Now When Are LLC Taxes And Fees Due?
Now – there is simply no initial $70 formation fee; and no first year’s $800 minimum tax due, at all. (Ironically, the $20 fee remains for filing the required Statement of Information, so you’ll still pay something for an LLC at the outset.)
You are then required to pay the $800 minimum tax for each subsequent tax year, i.e. generally by April 15th of each year (assuming you elect calendar year taxation, otherwise it is simply due on the 15th day of the 4th month of your taxable year).
For example, if you formed a California LLC to hold your real estate on June 18, 2022, your annual LLC tax is not due until April 15, 2023 (assuming you elect calendar year taxation, otherwise it is simply due on the 15th day of the 4th month of your taxable year).
For more information on California LLCs, view our LLC blog article here.
For more information on how Lucas Real Estate can assist you to in determining if an LLC is right for you, form and/or manage a real estate LLC, view our LLC services page here.
– Devin Lucas
Author Devin R. Lucas is a Real Estate Attorney, Broker and REALTOR®, specializing in Newport Beach, Costa Mesa and Orange County coastal communities, serving individual and investors in residential real estate.
sources:
- https://www.ftb.ca.gov/file/business/types/limited-liability-company/index.html
- https://www.sos.ca.gov/business-programs/business-entities/forms/limited-liability-companies-california-domestic
- https://www.ftb.ca.gov
- 2022 LLC payment voucher and instructions: https://www.ftb.ca.gov/forms/2022/2022-3522.pdf
Contact Information:
Lucas Real Estate
Real Estate Law | Real Estate Transactions | REALTORS®
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949.478.1623 office | 888.667.6038 fax
2901 West Coast Highway Suite 200
Newport Beach | California | 92663-4023
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