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?

[DG50]

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?

[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.

[DG50]

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.

[MaryK4]

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:

1. 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.
2. 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

[DG50]

The LLC was formed on January 1 2020 and I used short form certificate of cancellation a few weeks later to cancel it that same month and year. Essentially there was no income or expenses ran through LLC during those several weeks it was active during 2020. When I spoke to SOS (California) they said the $800 fee was waived. Do I still have to file first and last form 568 with Schedule K1s even though everything is a 0 everywhere on the form? Or is this not required since I have already filed short form cancellation certificate with SOS in 2020 and LLC is essentially closed? It isn't exactly clear if it is necessary to file form 568 even though LLC has been cancelled over a year ago.

[JotikaT2]

You would need to file the Form 568 as an initial and final return. 

The only except to the filing requirement would be if the LLC had a taxable year of 15 days or less and the LLC didn't conduct any business in the state during the 15 day period.

Please see the link below for more information from the FTB.

Filing requirements for dissolved entities

[DG50]

LLC did not conduct any business during the 18 day period in 2020, however it was more than 15 days limit. The Form 568 would essentially have 0s everywhere if required, would filing schedule K1s be needed as well? Thanks.

[JoannaB2]

Domestic partnership must file an information return on form 1065 unless no income and expenses incurred during the tax year.  If your business did not have any income and expenses, for federal tax purposes, you don't need to file form 1095. 

All LLC required to file form 568 (Franchise Tax Board form) is subject to and pay tax of $800 if doing business in California or been issued a certificate of recognition by California Secretary of State.  You may not file form 568. if the business didn't have any income and expenses.

Generally, LLC are subject to annual tax with or withour 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.

[DG50]

"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.

[gloriah5200 · Accepted solution]

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

[Thisbaer]

I need to start a LLC In Illinois for 2022 starting new job and is required 

[RobertB4444]

You're going to want to visit an attorney in order to start an LLC @Thisbaer.  

The state of Illinois has a guide to help you here. 

[wgooden]

Does TurboTax Home & Business prepare form 568 LLC for 2021 tax year.

[RobertB4444]

You can file form 568 with TurboTax as long as you only have one.  If you have multiple 568s you won't be able to efile.

Here is more info.

[dcp2120]

We opened LLC in CA last year Nov 2023. We didn't had any income or deductions. Do I have to file form 568? I paid 2024 llc fee online at ftb.com/pay.  2023 fee was waived due to covid relief.