Partnership CA filing requirement and dissolution

Technical topics regarding tax preparation.
#1
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I just found out client set up a CA LLC partnership. It never did business, no income nor expenses and zero assets. My understanding is that for the IRS there wouldn't be a partnership return filing requirement. For CA there seems to be because the LLC was registered in CA which is the same as doing business in CA. It never paid the $800 tax annual tax nor filed a return.

In CA there's AB 2503.
Below are current steps CA FTB take prior to Administratively Dissolving a qualified business entity (Corporation):
FTB will mail the Administrative Dissolution – Intent Notice (Form 5125C) to the entities last known address. SOS will post a notice of pending dissolution on its website, listing the name and SOS file number for 60 days.

Would the LLC still have to pay the CA back taxes of $800/year if the CA FTB administratively dissolves it? And file CA partnership returns?
 

#2
MilesR  
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When was the LLC organized? How many years do they "owe"?

I've heard from an attorney once that, although not always the ideal method, you can just ignore the LLC, not file, not pay, and eventually CA will terminate the LLC and leave you alone, although it will be a few years. She said that the LLC is liable for the fee and not the owners so CA can only levy assets in the LLC to pay the fee and cannot come after the owners. The FTB will send notices for a few years though.
 

#3
JAD  
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Check out Ralite (FTB case) and see if this corporate case has been applied to LLCs. I believe I have read that it has.
 

#4
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MilesR wrote:When was the LLC organized? How many years do they "owe"?

I've heard from an attorney once that, although not always the ideal method, you can just ignore the LLC, not file, not pay, and eventually CA will terminate the LLC and leave you alone, although it will be a few years. She said that the LLC is liable for the fee and not the owners so CA can only levy assets in the LLC to pay the fee and cannot come after the owners. The FTB will send notices for a few years though.


Yes, that is my understanding as well. I believe the LLC had been around for 2 years max. No tax returns have ever been filed which could be an issue for CA that requires a return because even being registered in CA is considered "doing business".
 

#5
TaxCut  
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MilesR wrote:When was the LLC organized? How many years do they "owe"?

I've heard from an attorney once that, although not always the ideal method, you can just ignore the LLC, not file, not pay, and eventually CA will terminate the LLC and leave you alone, although it will be a few years. She said that the LLC is liable for the fee and not the owners so CA can only levy assets in the LLC to pay the fee and cannot come after the owners. The FTB will send notices for a few years though.



Probably true, but do you really want to deal with those notices or phone calls from the client because they keep getting the same notice after you've already told them to ignore it? Not me. Then there's the Statement of Information that needs to be filed every other year. It's a $250 penalty for not doing that.

Whenever a client informs me they have formed an LLC but haven't used it, I tell them to either use it or dissolve it.

I also have those that formed an LLC in another state and think they don't have to file in California. Not true. They must register as a foreign entity and pay the $800 if doing business in CA.
 

#6
JAD  
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If it is only 2 years, I would file and pay up in order to avoid the constant contact from the FTB. Saving $1600 + penalties + interest + other filing fees (registering w the SOS) is not worth the fight.
 


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