California Corporations and LLCs

[Modee]

LLC is the best option, with LLC being listed as managed by your friend. However, once you obtain the LLC, you must also get a federal EIN for the LLC
Apply for an Employer Identification Number (EIN) online | Internal Revenue Service
That provides two layers of protection - LLC and EIN.

A dba in your own name offers zero protection because it refers back to your SS #.

So, creating the LLC and the EIN protects you as far as any monies in that bank account, because they will not refer back to your social security #. This methodology will also eliminate problems of mixing your money with taht of your friend, because it will all tie directly to the LLC. Next, the question is - do you want to really run a business or just use the LLC to hide income. If legit, then you'll be filing tax returns and so on each year for the LLC under that EIN. If not, then you'll want to make sure the LLC is not suspended.

Now in CA, you are required to pay $800. per year minimum tax to the Franchise Tax Board (FTB) to maintain a corporation or LLC. If you do not pay this $800. (rain or shine, whether you make a profit or not), eventually, the FTB is supposed to suspend your corporation. But the fact of the matter is that while the FTB does do this, like clockwork, to corporations, for some reason they do not do it to LLCs.

Another entity that regulates Corporations and LLCs in CA is the Secretary of State. Every two years you must file a "Statement of Information" with the Sec. of State (costs only $25.) or else, again, your LLC or Corporation will get suspended. This, you MUST do, no loopholes, but the cost is minimal.

Another alternative is to register an LLC in a state like Nevada, where the yearly tax is lower (only about $200. a year versus $800.), but what most people do not realize is that if the LLC has a presence in California, then it has to pay the alternate minimum tax BOTH in CA AND NV. So this is really a waste of time unless you can maintain a NV address for all purposes.

[American Psycho]

Okay under this thread;
I can register LLC for a couple hundred bucks online with Instacorp - will this give me an EIN? Or if I don't meet the minimum tax payment in the state in which it is registered will the LLC be suspended and the EIN invalid?

[Modee]

California LLCs are now being asked to file tax returns with the Franchise Tax Board (FTB) just like corporations. What I mean is, that state LLCs and state corporations in most all states must file annual returns and, at least with the state, pay a minimum tax. In California that minimum tax is $800. per year.

This $800. adds up quickly if not paid.

Corporations in California who have not paid the $800. have always been suspended within a few years. But until recently, California let LLCs slide on the Franchise Tax Board (state) returns and paying the $800., and did not suspend them.

What this meant, was that if you wanted an LLC to avoid liability, and maintained certain requirements such as regular meetings and so on, you could pay the $120. or so to create one and use it indefinitely without fear of suspension. But recently, California is perking up and suspending even LLCs who do not file their returns and pay the $800. per year.

So, the free lunch is coming to a close - if you create an LLC or corporation in California, you had better be prepared to pay at least the $800. per year to keep it active even if you do no business and use it just as a sort of legal front.


And by the way, to get an Employer Identification Number (EIN) you must both create the LLC or corporation, and request the EIN of the I.R.S., so no, merely creating an LLC will not get you an EIN. Once you get your federal EIN, and state tax ID number, you will be well above the radar and the IRS and FTB will start asking you to file returns.