Hi, states may require you to file tax returns based on two situations. 1. If you live in that state (residency). 2. If you earn money/receive passive money sourced from that state (source of income)
If your business is not located in CO or you do not physically go to CO to sell product during the year, then you would not be subject to CO income taxes.
If you did have business income sourced from CO, and you are required to file a federal tax return, you would be required to file a CO return regardless of how much income was sourced from CO. (each state has its own individual filing requirement)
An LLC is formed to protect an individuals personal assets from being lost due to business debt. If your business activity has risk of being sued or large debt, then an LLC could be beneficial in any of those events. Businesses that are not likely to be sued or have debt would not necessarily need an LLC. But you could create the LLC as a safety net.
CA LLC
Every LLC that is doing business or organized in California must pay an annual tax of $800.
This yearly tax will be due, even if you are not conducting business, until you cancel your LLC.
- You have until the 15th day of the 4th month from the date you file with the SOS to pay your first-year annual tax.
- Example: You form a new LLC and register with SOS on June 18, 2020. Your annual LLC tax will be due on September 15, 2020 (15th day of the 4th month)
- Your subsequent annual tax payments will continue to be due on the 15th day of the 4th month of your taxable year.
The annual tax payment is due with LLC Tax Voucher (FTB 3522).
Exceptions to the first year annual tax
For tax years beginning on or after January 1, 2021, and before January 1, 2024, LLCs that organize, register, or file with the Secretary of State to do business in California are not subject to the annual tax of $800 for their first tax year.
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