Single member limited liability company (SMLLC)April 2022 Tax News
Important information about SMLLCs
A single member limited liability company (SMLLC) may be disregarded for federal tax purposes. In California, however, there is a separate existence for this business entity and it is not disregarded for purposes of the:
- LLC tax
- LLC fee
- LLC return filing requirement
Generally, a disregarded SMLLC that is owned by an individual or a non-pass through entity must file a Form 568 by the 15th day of the fourth month after the close of the taxable year of the owner except if the disregarded SMLLC is owned by a pass-through entity, then the Form 568 must be filed by the 15th day of the third month after the close of the taxable year of the owner. California grants an automatic extension of time to file a return. An extension of time to file is not an extension of time to pay the LLC tax or fee.
Please remind your SMLLC clients that a disregarded SMLLC is required to:
- File a tax return (Form 568)
- Pay the LLC annual tax
- Pay the LLC fee (if applicable)
Additionally, we have received questions about Assembly Bill 85 and whether or not this applies to SMLLCs. During the 2020-21 legislative session, Assembly Bill 85 was enacted to make numerous changes to the California Revenue and Taxation Code. One of those changes was to eliminate the $800 annual tax for Limited Liability Companies (LLCs), Limited Liability Partnerships (LLPs), and Limited Partnerships (LPs), that organize, register, or file with the Secretary of State on or after January 1, 2021, and before January 1, 2024, for their first taxable year.
The statute does not distinguish between SMLLCs and multi-member LLCs. In fact, the plain language states that "Every limited liability company doing business in this state as described in subdivision (a) that organizes or registers with the Secretary of the State pursuant to subdivision (b) on or after January 1, 2021, and before January 1, 2024, shall not be subject to the tax imposed under this section for its first taxable year." (Rev. & Tax. Code, § 17941, subd. (g)(1) italics added.) Therefore, SMLLCs have the annual tax waived for their first taxable year as well.
Visit our Single Member LLC webpage for more information.