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Tips for LLCs filing Form(s) 100/100S

A small but growing number of limited liability companies are electing to be taxed as corporations.

The process is generally straightforward; the LLC must file federal Form 8832, Entity Classification Election, with the Internal Revenue Service in order to make the election.

The election is binding for California purposes and no separate election is allowed. If the LLC also elects S corporation status, the usual rules applicable to California S corporations are applicable.

Questions have arisen as to how to answer several questions on the Form 100 or Form 100S.

The following procedures will ensure problem-free processing:

• On the initial corporate return leave the California corporation number field blank, and,

• Use the full legal name as recorded with the California office of the Secretary of State (SOS). The DBA name should be entered on question I (Form 100), or question N (Form 100S).

 • We will issue the LLC a new seven digit FTB entity I.D. number. Please use this number as the California corporation number on future filings and include on all correspondence.

• If convenient, please manually write the file number issued by the SOS above the form title on the first page of the return.

Example: SOS # 200033310099.

Ask the Advocate
Continued from page 3 Here's another question about LLCs:

The 2000

Instructions Form 568, Limited Liability Company Return of Income state, "Every LLC that is doing business in California... must file Form 568 unless the LLC: 1) has elected to be taxed as a corporation for federal tax purposes.... ."

Although I couldn't find it in the Form 568 instructions, I believe entities making this election must bounce from Form 568 to Form 100,

California Corporation Franchise or Income Tax Return; or a Form 100S, California S Corporation Franchise or Income Tax Return as the case may be.

LLCs that elect to be taxed as a general corporation should file a Form 100; those that elect to be taxed as an S corporation should file Form 100S. We will include this information in the instructions for Forms 100, 100S and 568 next year.

Of course, the tax consequences resulting from that change in classification would also have to be reported for California income and franchise tax purposes, just as they were for federal tax purposes.

If you want the LLC to become a corporation for other than federal and state tax filings, you would need to dissolve the LLC and go through the general incorporation steps for a new corporation with the Secretary of State.

Manufacturers' investment credit lives on

The Manufacturers' Investment Credit (MIC) did not expire on January 1, 2001.

The MIC expires on January 1, 2001, or on the January 1 of the first year thereafter that the California Employment Development Department (EDD) 

determines that employment in the manufacturing sector does not exceed the 1994 figure by 100,000 jobs.

As of April 2000, EDD determined that employment in the manufacturing sector exceeded the 1994 figure by 204,000 jobs.

 Accordingly, the job growth figure substantially exceeds the 1994 level and the MIC will continue to be available.

Refer to California Revenue and Taxation Code sections 17053.49(i) and 23649(i)for more information.

March/April 2001

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