As the owner of an LLC, your work is never really done. Just when you thought you could relax because your LLC is officially formed, you find out that there are other things that you need to do periodically to maintain your LLC in good standing.
Failing to take these steps may result in having to pay penalties—or, worse yet, your LLC might no longer be allowed to do business in California. Yikes!
Being aware, in advance, of what you need to do to maintain your LLC is a step you can take to avoid being caught off guard. The information below will give you a general overview of what you should expect to do to keep your LLC going.
Although we’ve made every effort to ensure this information is accurate, it doesn’t constitute legal advice, nor is it a substitute for legal advice. Consult with your attorney for personalized guidance on all things related to your LLC.
LLC Maintenance in California: What You Should Expect
Here are a few of the main requirements for maintaining your LLC in California after it has been formed:
Pay California LLC Taxes and Fees, and File LLC Tax Returns
LLCs that are formed or registered to do business in California must pay annual taxes and fees to the state. They must also file an annual LLC tax return.
If you fail to pay the tax and fees, or you end up paying these late, your LLC will be required to pay a penalty.
If you don’t end up paying at all, or you don’t file a tax return, your LLC’s right to do business in the state of California may be suspended by the Franchise Tax Board.
Any contracts your LLC enters into while suspended are voidable at the request of the other party. Translation: a company or person you contracted with can simply call off the contract without suffering any legal repercussions. Yowza!
No business owner wants any of these things to happen, so be sure to mark your calendar and set aside money in your budget to pay the taxes and fees required of your LLC.
Pro tip: if you’re at all worried about falling behind or forgetting, consider signing up with Hyke. We’ll help you stay on track by reminding you of important deadlines.
What Are the LLC Taxes and Fees You Should Pay on Time Every Time?
- LLC Annual Tax
Each year, expect to pay an $800 annual tax to keep your LLC up and running.
This tax, which is due by April 15, should be paid to the California Franchise Tax Board, even if your LLC doesn’t earn any income.
Note: if you’re a newly formed LLC, payment of the LLC Annual Tax is due by the 15thday of the 4thmonth after your LLC registered with the California Secretary of State. So, for example, if you filed your Articles of Organization on June 19, your annual tax is due on September 15. Easy enough, right?
- LLC Fee
If your LLC has earned more than $250,000 in gross income, congratulate yourself on a job well done. Then, realize that you’ll have to pay an LLC fee. Bummer.
The fee that you will need to pay is based on your income, and the fee ranges from $900 to $11,790. See the chart below for the fees you’ll be required to pay based on your total income.
|If Total LLC Income Is:||The annual fee is:|
|$250,000 to $499,999||$900|
|$500,000 to $999,999||$2,500|
|$1,000,000 to $4,999,999||$6,000|
|$5 million or more||$11,790|
You must pay this fee in advance by June 15 every year. This means that you need to estimate what your LLC’s gross income for the year will be.
Sound like a lot of complicated math and guesswork? Just do your best. Then use Form FTB 3536, Estimated Fee for LLCs, to pay your estimated fee. Pay by mail or online (again, you can check ftb.ca.gov for details).
What if you estimate wrong? Well, if the estimated payment you make ends up being less than your LLC actually owed, you’ll have to pay a 10% penalty on the underpayment unless the amount you paid was equal to or greater than the amount you paid the prior year.
- California LLC Tax Return
Next up is your LLC tax return.
If your single member LLC is taxed like a sole proprietorship, there’s no need to file a separate federal income tax return for it. You do, however, need to file a special California LLC tax return, even if your LLC doesn’t earn any money. California is one of the few states that require such an annual tax filing for LLCs.
You’ll need to file Form 568, Limited Liability Company Return of Income, with the Franchise Tax Board, and this return will be due by April 15 every year. However, you do get an automatic 7-month extension as long as your LLC is in good standing. This means that you can wait until November 15 to file the return if you need the extra time. Not so bad after all, right?
The Franchise Tax Board uses this tax return to confirm that you’ve paid your LLC tax and fee for the year. So be sure to list your LLC’s income and the LLC tax and fee you’ve previously paid. If you owe another fee, you’ll pay it separately.
You can file the return by mail or electronically. If you have any trouble or run into any confusion, you could find a detailed explanation of how to fill out Form 568 in the Franchise Tax Board’s publication, Limited Liability Company Tax Booklet.
- Register and Pay California Sales and Use Taxes
Does your LLC sell goods to customers in California? Then you’ll need to collect and pay sales tax.
In order to do this, register with the California Department of Tax and Fee Administration (CDTFA) to get your seller’s permit.
With your permit, you’ll be able to collect the applicable sales tax from customers on the goods you sell, and you’ll then send the money to the CDTFA. Surprisingly straightforward!
Keep it simple by registering online at the CDTFA website, or do so in person at a CDTFA field office. Then, periodically submit sales tax returns with your sales tax collections to the CDTFA.
Depending on how much sales tax you collect, you may have to file sales tax returns monthly, quarterly, or annually. Keep in mind that you must complete your sales tax returns online(if you need more information, visit the CDTFA website).
Keep Statement of Information Up-to-Date
Also known as the SOI, the Statement of Information, Form LLC-12, is filed with the Secretary of State.
This provides a publicly accessible listing of your LLC’s address and your registered agent’s name and address, along with members’ names and addresses.
- You’re required to file your first SOI within 90 days after you file your articles of organization.
- Every two years from that point forward, you will be required to file a new SOI, whether or not any changes have occurred along the way.
- If the information in your SOI changes prior to the 2-year filing deadline, you need to file a new SOI. For example, if you get a new registered agent one year after you filed the last SOI, you should file a new on with the new registered agent’s information. Thankfully, you won’t incur a fee for this filing.
Here’s a good way to remember to file your SOI on time: if your LLC was registered in an even-numbered year, you’ll need to submit a new one every even-numbered year. On the other hand, if you registered in an odd-numbered year, it will be due every odd-numbered year.
The filing period for the SOI has a 6-month window: This means that you can file the same month you originally registered the LLC, or the 5 months before that month.
So, as an example, if your LLC was registered on July 15, 2018, submit your SOI every even-numbered year between March and the end of July.
You can file your SOI online at llcbizfile.sos.ca.gov. Expect to pay a $20 filing fee. And remember that failing to file an SOI can result in a $250 fee that could really sting.
Amend Your LLC’s Articles of Organization
Typically, the original LLC articles of organization for your business will contain basic information that will stay the same for a long time.
However, there might be instances in which you do need to make a major change that would alter significant information in your documents. In that case, you’ll have to file amended articles with the California Secretary of State.
When should you amend your articles of organization? A few examples include:
- If you change your LLC’s formal name
- If you change whether your LLC is managed by members or managers
- If you make other significant changes
When you do need to amend, use Form LLC-2 and pay a $30 fee.
Unfortunately, you can’t file online.
Note: You don’t need to amend your articles of organization to change your LLC’s address, the names or addresses of the LLC’s managers, or the name or address of the LLC’s agent for service of process. To change that information, you instead file a Statement of Information, as described above.
Renew Business Licenses
Next up in the maintenance of your LLC is periodically renewing any business licenses that you need in order to operate.
These licenses often have to be renewed annually, with a fee each time. But, to be sure, just check your city or county government website to see what the renewal requirements are.
Renew Fictitious Business Statement Every 5 Years
Another form that you need to renew is your fictitious business statement, if you filed one in the county where your main office is located.
Remember, this form lets you do business under a name other than the one listed in your LLC’s articles of organization.
You must renew this statement every five years, and you should expect to pay a renewal fee as well.
Bonus Tips: Keep These Documents in Your LLC’s Office All the Time!
According to California’s LLC law, you’re required to keep certain documents at your LLC’s principal place of business—a.k.a. your main (or only) office.
Those documents include:
- A copy of the LLC Articles of Organization, along with all amendments
- A copy of your LLC’s Operating Agreement, along with any amendments
- An alphabetical list of the full name and last known home address of each member of the LLC, along with each member’s contribution and their share in profits and losses
- If the LLC is a manager-managed LLC, a current list of the full name and business or residence address of each manager (this is unlikely to apply to a single member LLC)
- If the LLC owns any real estate, a copy of business records relevant to the amount, cost, and value of the property
- If you obtained an employer identification number (EIN) for your LLC from the IRS using IRS Form SS-4, a copy of the completed form must be kept for 5 years
- A copy of the LLC’s financial statements must be kept for the past 6 years
- A copy of the LLC’s federal, state, and local income tax returns and reports must be kept for 6 years
- The LLC’s minutes, or written consents, as they relate to the internal affairs of the LLC, must be kept for the past 4 years
Protect Yourself: Sign Papers on Your LLC’s Behalf
Another part of your LLC maintenance involves taking steps to ensure your LLC remains a separate legal entity, with a separate legal existence from your own.
Doing so will help you avoid being held liable for your LLC’s debts and liabilities.
One of the best ways to achieve this is by always signing LLC papers, documents, contracts, and other commitments clearly in the name of the LLC, not in your own name. And the best way to do this is by first stating the name of the LLC and then signing your name on its behalf.
If you don’t do this, the other party to a contract might be able to hold you personally liable. And you certainly don’t want that to happen!
Here’s an example:
By: your name
Super simple, but really effective!
Maintaining Your LLC Doesn’t Have to Be a Chore!
If your head is spinning after reading through all of this information, and you want to be sure that you’ll have the help that you need to effectively maintain your LLC for years to come, consider signing up with Hyke.
The experts at Hyke can help you when you form your business, but we’ll also be there every step of the way as you keep your LLC going. Whether you want to be sure every form is properly filled out and filed, or you want to rest assured that your taxes and fees are paid on time, Hyke is here to help. Contact us today to learn more!
Stephen has dedicated his career as an attorney and author to writing useful, authoritative and recognized guides on taxes and business law for small businesses, entrepreneurs, independent contractors, and freelancers. He is the author of over 20 books and hundreds of articles and has been quoted in The New York Times, Wall Street Journal, Chicago Tribune, and many other publications. Among his books are Deduct It! Lower Your Small Business Taxes, Working with Independent Contractors, and Working for Yourself: Law and Taxes for Independent Contractors, Freelancers & Consultants.