Do I need to file Form 568 (with K1s for California) if I formed an LLC in California taxed as a partnership but closed it same year 2020 and had no expenses/income?

Forum|Forum|5 years ago
February 23, 2021
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I would think not as an LLC with no business activity that is taxed as a partnership and is currently closed is not required the file. If not, there will essentially be no LLC taxed as a partnership first and last tax return for 2020, correct? Also this would apply to IRS' form 1065 with appropriate Schedule K1s, right?

TurboTax Self Employed Online

Best answer by gloriah5200

"Generally, LLC are subject to annual tax with or without income as long as LLC is active. Depending on the state of incorporation, LLC is exempted to an annual tax during the first year of operation or taxable year was 15 days or less."

So first year of operation is also exempted in California from filing Form 568 or only if taxable year was 15 days or less? So far I have not seen a clear and cut answer on whether it is required to file an initial and final form 568 for California without any Form 1065 for IRS, if LLC was active for 18 days and there was no income/expenses during that time.

However, did the person you spoke to at the CA FTB tell you both conditions that must be met in order to not file the CA 568 nor pay the $800 for the year?

Please see the following:

D. Who Must File

An LLC may be classified for tax purposes as a partnership, a corporation, or a disregarded entity. The LLC should file the appropriate California return.

Form 568 must be filed by every LLC that is not taxable as a corporation if any of the following apply:

The LLC is doing business in California.
The LLC is organized in California.
The LLC is organized in another state or foreign country, but registered with the California SOS.
The LLC has income from California sources (Nonregistered foreign LLCs, see Exceptions to Filing Form 568, below).

An LLC is not required to file a tax return and is not subject to the annual tax and LLC fee if both the following are true:

The LLC’s taxable year is 15 days or less.

AND

The LLC did not conduct business in the state during the 15 day period.

Refer to the following link for additional information:

CA 568 not required and no annual fee due conditions

ToddL99

If no income and no expenses (treated as deductions or credits), then there is no requirement to file a federal return.

From Instructions for Form 1065 (2020) : Except as provided below, every domestic partnership must file Form 1065, unless it neither receives income nor incurs any expenditures treated as deductions or credits for federal income tax purposes.

Until you officially dissolve the partnership, however, CA expects you to file Form 565.

A partnership (including REMICs classified as partnerships) that engages in a trade or business in California or has income from a California source must file Form 565.

Doing Business - A taxpayer is doing business if it actively engages in any transaction for the purpose of financial or pecuniary gain or profit in California or if any of the following conditions are satisfied:

The taxpayer is organized or commercially domiciled in California.
The sales, as defined in R&TC Section 25120(e) or (f), of the taxpayer in California, including sales by the taxpayer’s agents and independent contractors, exceed the lesser of $601,967 or 25% of the taxpayer’s total sales.
The real property and tangible personal property of the taxpayer in California exceed the lesser of $60,197 or 25% of the taxpayer’s total real property and tangible personal property.
The amount paid in California by the taxpayer for compensation, as defined in R&TC Section 25120(c), exceeds the lesser of $60,197 or 25% of the total compensation paid by the taxpayer.

DG50Author

The LLC was cancelled in California the same year it was formed. Since no income or expenses went through, is there a need to file a form 568 with 0s everywhere or not? It seems not however I am not completely sure what is required. Thanks.

MAK70

Yes, you must file for the final return.

In general, LLCs are required to pay the $800 annual tax and file a California return until the appropriate papers are filed. In order to cancel an LLC, the following steps must be taken:

File a timely final California return (Form 568) with the FTB and pay the $800 annual tax for the taxable year of the final return.
File Form LLC-4/7, Certificate of Cancellation, with the California SOS. The California SOS also requires a domestic LLC to file Form LLC-3, Certificate of Dissolution. Contact the California SOS for more details.

The Form LLC-4/7’s effective date will stop the assessment of the $800 annual tax for future taxable years. If Form LLC-4/7 is filed after the taxable year ending date, a subsequent year return and an additional $800 tax may be required.

The annual tax will not be assessed if the LLC meets all of the following requirements:

The LLC files a timely Final Limited Liability Company Return of Income, for the preceding taxable year, including extension.
The LLC did not do business in California after the final taxable year.
The LLC files the appropriate documents for cancellation with the California SOS within 12 months of the timely filed Final Limited Liability Company Return of Income.

2019 Instructions for Form 568 Limited ... - FTB.ca.gov

@DG50