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Why Your LLC May Be Doing More Than You Think In California Even When It’s Doing Nothing

Until two years ago, determining whether a company was “doing business” in California depended upon whether it was “actively engaging in any transaction for the purpose of financial or pecuniary gain or profit”.  Cal. Rev. & Tax. Code § 23101.  While this is a very open-ended definition, the statute at least required that a taxpayer be actively engage in a transaction.  Requiring…

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60 Acres And A Lawsuit Challenging The FTB’s Interpretation of “Doing Business”

Swart Enterprises, Inc. is an Iowa corporation.  It operates a farm with some 60 acres of crop land in Kansas.  Swart has no physical presence in California.  It owns no real or personal property in California.  It has no California employees.  Swart’s sole connection to California is as an investor in a fund that trades in…

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The FTB’s “Doing Business” Trap For Foreign LLCs With California Managers, Members Or Agents

According to the California Franchise Tax Board, a limited liability company classified as a partnership must do all of the following: File Form 568 (limited liability company return of income); Pay an annual tax of $800; Pay an annual LLC fee based on total income from all sources derived from or attributable to California. An LLC…

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Legislature Imposes New Penalty On LLCs

As I discussed in this earlier post, “transacting intrastate business” is not the same as “doing business” in this state.  Foreign corporations and limited liability companies must register with the Secretary of State if they transact intrastate business.  Even though foreign corporations and LLCs are not transacting intrastate business in California, they may be considered…

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