After further review we still believe that the annual franchise tax of $800 still applies to SMLLCs. Assembly Bill 85 does provide a first-year exemption from the annual $800 franchise tax; however, AB 85 only allows the first-year waiver for limited partnerships, limited liability partnerships, and limited liability companies (but not SMLLCs as explained below).
Our support for claiming that SMLLCs are not eligible for the first-year waiver of the $800 annual franchise tax is predicated on information obtained from the CA Franchise Board website, in the section entitled Limited Liability Company Filing Information. That section provides the following regarding the annual franchise tax and the first-year waiver:
- "Assembly Bill 85 provides a first-year exemption from the $800.00 annual tax to limited partnerships, limited liability partnerships, and limited liability companies that organize or register with the California Secretary of State on or after January 1, 2021, and before January 1, 2024.
- LLCs classified as disregarded entities or as partnerships are subject to an $800 annual tax..." (underline added)
On the same page as the above quoted information, the CA Franchise Board indicates that for CA tax purposes, SMLLCs are classified as disregarded entities.
Because disregarded entities (i.e., SMLLCs) are not eligible for the first-year waiver of the annual tax, TurboTax includes such tax on the returns for SMLLCs.
Below is the link to the above quoted information.
Limited Liability Company Filing Information
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