Tax Season Comes To A Close: One Way To Lower Tax Liability Of Your LLC.

Many businesses are beginning to understand the flexibility and usefulness of a limited liability company as a way to conduct business within California.  However, with tax season coming to a close, many successful business owners were stunned to discover the Gross Receipts tax levied upon California limited liability companies and foreign LLC's which register to do business in California.

The gross receipts tax is a state tax imposed upon LLC's conducting business in California.  The minimum gross receipts tax for an LLC is $800.  However, the gross receipts tax works on a graduated scale based upon the gross receipts of the company.  Once a company has gross receipts in excess of $250,000, the tax increases from $800 up to $11,970, depending on the level of gross receipts.

Tredway, Lumsdaine and Doyle partner, Mark C. Doyle, with the help of associate Brooke M. Pollard, recently helped an existing LLC convert to a California corporation pursuant to California Corporations Code section 1150 et. seq.  The existing LLC had increased its revenues over the past four years, and was paying in excess of $6,000 per year to the State of California under the gross receipts tax, exclusive of Federal and California income taxes.  By converting the existing LLC to a corporation, the business was able to save significant amounts of money and lower their annual tax liability. 

The conversion of an LLC to a corporation or a corporation to an LLC can have significant tax implications above and beyond the gross receipts tax.  These implications must be reviewed by both the attorney and CPA of the company to determine if this is in the business' best interest.  Please call us if you have any questions or would like additional information about either the gross receipts tax or the conversion of an LLC to a corporation. 

Article Submitted By: Attorney Brooke Pollard