Shula on sun 21 sep 08
A while back, I asked about LLC vs Sole Proprietorship. Most people who responded were sole proprietors. But, being concerned about liability - not that I would do something on purpose - I was leaning towards going the LLC route. So, I have spent this evening gathering more in depth information about creating an LLC. Spent time on online legal information sites and the website of the California Secretary of State where I download a bunch of forms. As I was reading the fine print, I came across something that surprised me. I then went onto the CA Franchise Tax Board website and the surprising comment seems to be true. If I incorporate in CA as an LLC, there is a minimum tax I must pay of $800. As I read it, if I don't sell one pot, I would still have to pay $800 for the pleasure of being an LLC. In one of the Franchise Tax Board brochures, it mentions that this is one of the differences between Federal taxes and CA taxes on LLC's.
Is anyone out there in Clay Land an LLC in California? If so, am I reading this correctly or have I missed something? If I am reading this correctly, the Franchise Board has just determined how I will handle the business - sole proprietorship.
Thanks for your help.
Shula
Desert Hot Springs, California USA
Earlier in the day, I bought a domain. Now I need to create a website. It's been quite a while since I wrote anything in HTML.
Josh Berkus on mon 22 sep 08
Shula,
> If I incorporate in CA as an LLC, there is a minimum tax I must pay of
> $800. As I read it, if I don't sell one pot, I would still have to pay
> $800 for the pleasure of being an LLC. In one of the Franchise Tax Board
> brochures, it mentions that this is one of the differences between
> Federal taxes and CA taxes on LLC's.
This is correct. It's the reason I don't have an LLC.
--
Josh Berkus
San Francisco
Corey Wong on wed 24 sep 08
Shula,
What liability are you concerned about?
Depending on the risk level you are heging against an $800 corporate tax may
be better than an $80,000 personal liability suit.
It all depends on your circumstance.
Corey
San Jose
On Mon, Sep 22, 2008 at 5:45 PM, Josh Berkus wrote:
> Shula,
>
> > If I incorporate in CA as an LLC, there is a minimum tax I must pay of
> > $800. As I read it, if I don't sell one pot, I would still have to pay
> > $800 for the pleasure of being an LLC. In one of the Franchise Tax Board
> > brochures, it mentions that this is one of the differences between
> > Federal taxes and CA taxes on LLC's.
>
> This is correct. It's the reason I don't have an LLC.
>
> --
> Josh Berkus
> San Francisco
>
The Fuzzy Chef on thu 25 sep 08
Corey Wong wrote:
> Shula,
>
> What liability are you concerned about?
>
> Depending on the risk level you are heging against an $800 corporate tax may
> be better than an $80,000 personal liability suit.
Well, an LLC isn't liability insurance. You still need to buy that
separately. What an LLC does is limit what a victorious liability
plaintiff can seize: that is, they can just seize your business assets
(wheel, studio, stock) and not your personal ones (house, car, spouse's
checking account).
However, having someone take your wheel and kiln isn't exactly peachy.
So the liability insurance is more important than the LLC.
BTW, note that California's LLC fees are among the highest in the
nation, partly because California gives some extra abilities to LLCs
(like being taxed as a corporation). Other states have much lower LLC fees.
IANAL, of course.
--Josh
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