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If you form an LLC in the 15-day window in 2017, you can avoid paying California's annual minimum tax twice in 2018!
Without taking advantage of the 15-day rule, newly formed LLCs will have to pay the California Franchise Tax Board minimum tax of $800 twice in less than a year. This is because the tax is due by the 15th day of the 4th month after LLC formation, and then again in the next tax year on April 15th.
For example, without the 15-day rule, an LLC formed in February would have to pay its initial $800 tax by May 15th, and then again 11 months later on April 15th. In the worst-case scenario, an LLC formed on December 1st would have to pay the tax by March 15th, and then again just one month later on April 15th.
However, by taking advantage of the 15-day rule, a newly-formed LLC would only have to pay the minimum tax by April 15th the following year (and every year thereafter on this date).
If you form a corporation within the 15-day window in 2017, you can avoid paying California's annual minimum tax until 2019!
California corporations must pay the $800 minimum tax starting in the second year of existence. So for example, a corporation formed on December 1, 2017 would have to pay the $800 minimum tax by April 15, 2018. However, a corporation formed within the 15-day window would not need to pay the $800 minimum tax the following year, but rather in 2019!
If you form an LLC or incorporate within the 15-day window in 2017, you won't have to file a tax return for your LLC or corporation until 2019!
Without taking advantage of the 15-day rule, a newly-formed LLC or corporation would have to file a tax return for its first, partial year of existence, no matter how short that tax year is. For example, an LLC formed on November 30, 2017 would have to file a tax return the following April 15th, 2018 for the 32 days it was in existence during the previous year. Using the 15-day rule, an LLC or corporation would not have to file a tax return until April 15th 2019.
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There are only two requirements to take advantage of the 15-day rule:
Form your LLC or incorporate anytime during the last 15 days of the year (December 17th-December 31st) to take advantage of the 15-day rule when setting up a small business.
For example, if you form your LLC on December 20, 2017, your "tax year" for 2017 would be 12 calendar days. Therefore, to utilize the 15-day rule you would have to refrain from doing business for 12 days (December 20th-31st), and would not be able to start conducting business until January 1, 2018.
Creative Vision Legal is a law firm offering legal services tailored to small business owners looking for affordable yet reliable service and advice related to setting up a small business, legal considerations in running your business, intellectual property rights, and internet law.
While services provided by many online legal websites like Legal Zoom or Rocket Lawyer are not performed by licensed, practicing attorneys (read the fine print!), all services offered by Creative Vision Legal are performed by licensed California lawyer Michael J. Thomas. Websites like these merely take care of the initial paperwork involved in business formations, but fail to offer comprehensive legal advice from a business formation lawyer before and after you form a corporation or start an LLC.
Michael J. Thomas has been licensed to practice law since 2004, and received his J.D. (juris doctor) and an LL.M. (Master of Laws) in Intellectual Property Law, with Honors, from Golden Gate University School of Law, San Francisco, CA. He is also admitted to practice before federal courts in the Northern District of California.
“Personalized service from a practicing attorney is what sets my business formation packages apart from Legal Zoom, Rocket Lawyer, or other online legal service websites. I invite you to experience the difference personalized legal service makes when starting your business!”
You get a 30-minute initial consultation to assess the legal needs of your business, and another 30-minute consultation approximately 1 year after formation.
Every business formation package price includes the government filing fees and the legal fees for preparing and filing your documentation.
Every business document (for example, an LLC operating agreement, or corporate bylaws) is customized to your needs. The firm does not believe in "one-size fits all," document chop-shop solutions.
The Book "Deadbase 50" Got Off the Ground with
Creative Vision Legal.
“We really enjoyed working with Mike. He is very knowledgeable, organized, and efficient. We didn't know anything about creating or managing an LLC and Mike took us every step of the way and took care of all the legal and administrative issues for us. He showed us how to form the LLC and all the hoops to jump through. Mike took care of all the documents we needed to file with the various government offices and filed most of them for us. It was like having our own in-house lawyer as part of our team. I can't recommend Mike and Creative Vision Legal enough.”
Stu Nixon (Co-author and publishing company co-owner)
Vertigo Home Laid the Groundwork for Becoming a Design & Furnishings Sensation with Help from Creative Vision Legal.
“Mike advised us on forming an LLC. He explained the advantages of an LLC for our business, and then took care of everything. The whole process was effortless. He even called on several occasions after the set up to see if we had any problems switching everything over to the LLC (car title, bank accounts, etc.). He seems to really care about our business and our progress. Mike also helped us get our logo and business name trademarks registered.”
Martin Ulrich (Co-owner)
Here are answers to some frequently asked questions:
Utilizing the 15-day rule will require some planning, and in some instances, you may have to incur extra costs to form your LLC or corporation. The problem lies with the fact that California still relies on old-fashioned "snailmail" for filing LLC Articles of Organization (the document necessary to form an LLC), or in-person drop-offs at the Secretary of State's office in Sacramento. Options range from monitoring online processing times and sending via Overnight mail (cheapest but most uncertain) to paying for expedited service and a messenger to file in-person (most expensive at $500 or more, but most certain).
No problem. You can schedule a 30-minute legal consultation with Creative Vision Legal to assess whether an LLC or corporation is right for your business. Consultations cost $50, but this cost will be credited towards the price of the package you ultimately purchase when setting up a small business. Click here to schedule a consultation by phone.
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