California LLC Filing Rules: Common Questions, Costly Mistakes, and How to Stay Compliant

Limited Liability Companies (LLCs) remain one of the most popular entity types for business owners, creators, professionals, and investors. However, California LLC filing rules are often misunderstood, especially when members live in different states, businesses operate online, or the LLC never actually starts operating.

At Velin & Associates, Inc., an accounting firm serving Los Angeles and clients nationwide, we regularly see penalties, $800 minimum tax bills, and compliance notices that could have been avoided with proper planning. Below, we address some of the most common LLC questions we receive during tax season and explain what they mean in real-life situations for our clients.

Does a California Resident’s Out-of-State Single-Member LLC Have to File in California?

Short answer: Yes.

If a California resident forms a single-member LLC in another state, even if:

• There are no business transactions in California, and
• All income comes from other states,

California still requires:

• Form 568 to be filed, and
• Payment of the $800 annual LLC tax.

California presumes that if the owner is a California resident, the LLC has sufficient connection to the state.

Example:
As a CPA for YouTubers, we often see the following scenario:
A Los Angeles-based content creator forms a Wyoming LLC to receive ad revenue and brand sponsorships. Even though YouTube and sponsors are located outside California, the owner lives in California.

👉 At Velin & Associates, Inc., we would explain that Form 568 must still be filed, and the $800 tax applies—though the LLC gross receipts fee may not, if income is entirely from non-California sources.

What If the LLC Owns Out-of-State Property Only?

Even if an LLC’s only assets are real estate located outside California, the rules may still apply.

If one or more managing members are California residents, California generally requires:

• Annual filing
• Payment of the $800 minimum tax

The Franchise Tax Board (FTB) presumes the LLC is doing business in California unless the taxpayer can prove otherwise.

This frequently affects high-net-worth individuals, real estate investors, and professionals with multi-state investments.

Does a California LLC Owned by an Out-of-State Corporation Trigger California Filing?

Yes—often twice.

If:

• A California LLC is owned by an out-of-state corporation,

Then:

• The LLC files Form 568, and
• The out-of-state corporation is considered to be doing business in California and must also file a California corporate return.

Example:
As a CPA for Amazon Business, we often see the following situation:
An Amazon brand owner sets up a Delaware corporation to own a California LLC that handles logistics and fulfillment.

👉 At Velin & Associates, Inc., we would ensure:

• Proper filing for both entities,
• Accurate apportionment of income, and
• Avoidance of underreporting that could trigger audits or penalties.

If an LLC Did No Business and Was Canceled Quickly, Is a Tax Return Still Required?

Yes.

If an LLC:

• Was formed, and
• Canceled within 12 months using the short-form cancellation,

It may qualify for exemption from the $800 annual tax only if:

• A final tax return is filed, even if it’s a zero return.

Failure to file that final return can eliminate the exemption entirely.

Example:
As a CPA for Shopify store owners, we often see this scenario:
A client launches an online store, forms an LLC, but never makes a sale and shuts it down within months.

👉 We would still file a timely zero Form 568 to preserve the $800 tax exemption and avoid future FTB notices.

Missed the Filing Deadline? Consider Voluntary Administrative Dissolution

If the final return was not filed on time, the LLC may lose its exemption. In these cases, applying for voluntary administrative dissolution with the FTB may help avoid the $800 tax—if done correctly and promptly.

This strategy is especially helpful for:

• Failed startups
• Side businesses
• Creative projects that never launched

Can a Married Couple Have a Single-Member LLC in California?

Yes—because California is a community property state.

If a married couple jointly owns an LLC:

• It can still be treated as a single-member LLC, and
• Income and expenses are considered community property and split between spouses.

Example:
As a CPA for doctors or a Dentist CPA, we might see the following scenario:
A married couple owns a medical practice LLC together.

👉 At Velin & Associates, Inc., we ensure income is reported properly on both spouses’ returns while maintaining single-member LLC tax treatment when appropriate.

Important LLC Tax Due Dates Many Business Owners Miss

LLC payments do not follow the same deadlines as other entities:

• Annual $800 tax:
  📅 Due April 15 (15th day of the 4th month)
• LLC gross receipts fee (if applicable):
  📅 Due June 15 (15th day of the 6th month)

⚠️ The first-year exemption from the $800 tax is not available for entities formed after 2023.

This is a common pitfall for:

• Online commerce CPA clients
• Filmmakers and creators
• Medical practices and dental businesses

Why Professional Guidance Matters for LLC Owners

Whether you’re a:

• TikTok or YouTube creator,
• Shopify store or Amazon business owner,
• Dental practice or medical practice specialist, or
• Business owner or high-net-worth individual,

California LLC compliance is rarely “simple.”

At Velin & Associates, Inc., we provide:

• Bookkeeping and tax services
• Tax preparation and planning
• Entity compliance and dissolution guidance
• Strategic advice for creators, healthcare professionals, and online businesses

For more information about our tax planning services, contact us today: visit our website.

Velin & Associates, Inc

8159 Santa Monica Blvd STE 198/200 West Hollywood, CA 90046
323-902-1000
dmitriy@losangelescpa.org

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