Does California taxes the Franchise Tax based on total income from all other states for the out-of-state LLCs?

If a LLC that was formed in a different state other than California does some business in California, will California determine the yearly Franchise Tax amount based on the total Gross Income from everywhere including the California sources or only from the sources that are located in California? The company is registered in California as an out-of-state LLC.

Thanks.

285

Expert Alumni

Mar 24, 2025 4:14:02 PM

No, California doesn't tax your entire income from all states. For out-of-state LLCs doing business in California, the franchise tax is only applied to income sourced from California.

The amount on line 1 of Form 568 comes from Schedule IW (Income Worksheet). This schedule calculates California income that is then used to calculate franchise tax.

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Does California taxes the Franchise Tax based on total income from all other states for the out-of-state LLCs?