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State of California Franchise Tax Board

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Avoid the 2014 Minimum Franchise or Annual Tax

If your client did not conduct business this year, now is the time to talk to your client.

Your client’s business entity may avoid the minimum franchise or annual tax[1] for current and subsequent taxable years if they meet all of the following requirements:

  • File your final franchise or annual tax return timely, including extension, for the preceding taxable year and mark it final.
  • Conduct no business after the last day of the preceding taxable year.
  • File the appropriate termination documents[2] with the California Secretary of State (SOS) within 12 months of the filing date of your final tax return.

What if your client filed a timely return, but did not check the final tax return box?

If the return is their final return, no worries, send to us all of the following (applies to
all entities):

  • A copy of the tax return.
  • A letter stating the entity did not conduct any business after the last day of the preceding taxable year.
  • A copy of the Certificate of Dissolution, Surrender, or Cancellation showing the date Secretary of State (SOS) granted the dissolution, surrender, or cancellation and that it was done within 12 months of the filing date of the timely final franchise or annual tax return.

Mail the letter and documentation to:

Franchise Tax Board
P.O. Box 942857
Sacramento, CA 94257-0540

Suspended or Forfeited Entities

If your client’s business entity is suspended or forfeited, the California SOS cannot accept termination documents. You must complete all of the following requirements before you submit your termination documents to SOS:

  • Pay all outstanding balances due.
  • File any delinquent tax returns.
  • File FTB 3557 BC, Application for Certificate of Revivor, (Banks and Corporations), FTB 3557 LLC, Application for Certificate of Revivor, (LLCs), or FTB 3557 E, Application for Certificate of Revivor, (Tax-Exempt Corporations).

For more information regarding the revivor process, go to ftb.ca.gov or call 916.845.7033 (press 1 for suspended business entities and press 1 again for revivor).

[1]California law requires a business entity to pay the minimum franchise tax if it is incorporated or organized in the state (domestic corporations); qualified or registered to do business in the state (foreign corporations); or doing business in the state without having incorporated, organized, registered or qualified. We require the minimum franchise or annual tax from all business entities (Corporation, S-Corp, Limited Liability Company, or Limited Partnership) whether active, inactive, operating at a loss, or filing a short-period return (less than 12 months).
[2]A California or foreign (out–of–state or out–of–country) business entity can dissolve, surrender or cancel by filing the applicable termination forms with the California Secretary of State (SOS). Please refer to the California SOS for forms, instructions, fees, any additional requirements and relevant statutory filing provisions.

Back to July 2014 Tax News

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