If you’re starting a California corporation, take a second and look at the calendar. Depending on what time of year it is, you might want to wait on your incorporation. Why? Three important words: The Franchise Tax Board.
In California, every Limited Liability Company (LLC), S-Corp or C-Corp, or Partnership has to pay an annual fee to the Franchise Tax Board. This fee must be paid, and it’s not cheap: it’s $800.00 every year and it doesn’t have anything to do with how much money you’ve made. In fact, you could have lost money and the State of California wouldn’t care: they still want their $800.00.
So why, you may ask, does the time of year matter for an incorporation? Because if you start a business late in the year, you’re still responsible for the full $800.00 amount, it’s not pro-rated. And then a month or two later you’ll be on the hook for another $800.00.
Unless you’re in the rare situation where you absolutely have to start your business right away and the $800.00 pales in comparison to the amount of money you’ll be making, sometimes it makes sense to look at the calendar and wait until January 1st. If you’re near the end of the year, say October onward, it should be something your attorney should at the very least mention to you.
That’s why I tell my clients right off the bat about the $800.00 fee. Many assume the fee will be pro-rated or that it will be good for a calendar year before speaking with me. To their dismay, California doesn’t operate like that and they’re paying $1600.00 before their business has gotten off the ground.
If you’d like to schedule an appointment please call my office at 844 695 1487 or e-mail me at email@example.com
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