It is the first week of December. That means this post is extremely time sensitive because it can help you save money immediately if you were thinking of forming an LLC in California.
As many of you already know, California charges a annual minimum tax of $800 on each LLC or corporation every year. That minimum tax is due regardless of how much revenue your company generates (or doesn’t generate) in a tax year.
This is especially relevant now in the first week of December because if you were to form your business entity today you would be liable for taxes for this year even though there are only a few weeks left in the year. Not a great deal and not recommended.
So I am currently recommending to my clients to wait a little bit if they can before they form their business entity. If you form your business entity after December 17 (and do not conduct any business between that date and the end of the year) you may not have to pay the $800 California minimum LLC taxes for the 2017 tax year.
Plan carefully and avoid burning money.
I wanted to share this with you because I have seen people make this mistake where they form a business entity towards the end of the year and are liable for taxes for that year. In fact this is one of the hazards of using a DIY service such as LegalZoom to form your business entity. Often those companies will not advise you of the option to wait a couple weeks to form your business entity, and by doing so, they end up being more expensive than hiring an attorney to get the information that you need to make the right choice that is because you will not only be paying their service fee, but you will also be paying an extra $800.
Obviously, there will be other concerns related to the timing of when to form an LLC or other business entity, but this is definitely something to be aware of.
There are also a few other tips that we have been giving our clients on how to save money on business entity formation. If you would like to know more about that or get strategy advice on forming your business entity do not hesitate to schedule a call with us you can easily set an appointment for a call on our online calendar and we will give you a phone call to discuss your options and possible strategies for getting your business entity right the first time.
Final note: while this information is valid generally, it is not intended as legal or tax advice and can change from year to year. Before making a decision when or how to form a business entity, talk to an attorney in your jurisdiction.
