What California Form 568 (2013) Is For
California Form 568 (2013) is the annual return most Limited Liability Companies (LLCs) must file with the Franchise Tax Board. It reports the LLC’s income, deductions, and credits, calculates the mandatory $800 annual tax, and applies the LLC fee based on California-source income.
Because most LLCs are treated as pass-through entities, they don’t pay regular income tax at the entity level. Instead, income, deductions, and credits flow through to the members, who report their share on their own individual income tax return or business return. Form 568 also ties into Schedule K-1 (568), which shows each member’s distributive share and affects their personal tax liability.
Form 568 generally applies to LLCs classified as partnerships for federal tax purposes, including most multi-member LLCs. Single-member LLCs (SMLLCs) that are disregarded entities still file California Form 568 (2013), mainly to report the annual tax and LLC fee. LLCs that elected corporate taxation file Form 100 or 100S instead.
When You’d Use California Form 568 (2013)
You must file Form 568 if your LLC is doing business in California, organized in California, registered with the California Secretary of State, or earning income from California sources. “Doing business” includes having members or managers carrying on activities in the state, even if the company is headquartered elsewhere.
For 2013, LLCs classified as partnerships generally must file by the 15th day of the third month after the close of the taxable year. For calendar-year LLCs, that’s March 15, 2014. Some SMLLCs share that due date, while SMLLCs owned by individuals typically have a due date similar to the owner’s return, often April 15.
California grants automatic extensions—about seven months for partnership-style filers and six months for many SMLLCs. The extension only delays the time to file a tax return, not to pay the $800 tax or LLC fee. If you have a past due return, file as soon as possible to reduce penalties and interest.
You use California Form 568 (2013) again when filing an amended return. That happens if you discover errors, receive corrected information, or the IRS changes your federal return. You must check the amended return box, issue amended Schedules K-1 (568) to affected members, and, if the changes stem from an IRS audit, file the amended California return within six months of the final federal determination.
Key Rules or Details for 2013
The $800 Annual Tax
Every LLC doing business in California or registered with the Secretary of State owes an $800 annual tax. This is a flat “privilege” tax, not based on profit, and applies even if the LLC has no income or operates at a loss. For calendar-year LLCs, the 2013 annual tax is due April 15, 2013 (the 15th day of the fourth month after the year begins), and is paid with Form FTB 3522.
The LLC Fee on California Income
In addition to the $800 tax, LLCs with California-source income of $250,000 or more must pay an LLC fee. For 2013, the fee is based on total California income before deductions:
- $250,000–$499,999: $900
- $500,000–$999,999: $2,500
- $1,000,000–$4,999,999: $6,000
- $5,000,000 or more: $11,790
You estimate this fee by the 15th day of the sixth month of the year (June 15 for calendar-year LLCs) and pay it using Form FTB 3536. Underpaying can trigger a 10% penalty on the underpayment.
California–Federal Differences for 2013
For 2013, California conforms to the Internal Revenue Code only through January 1, 2009. That means some federal provisions—such as certain bonus depreciation rules and credit regimes—do not apply for California. You can’t simply copy federal figures; you may need California-specific adjustments, which can affect your income tax and LLC fee.
Nonresident Members and Withholding
If your LLC has nonresident members, the filing requirements include either obtaining Form FTB 3832 (consent to file a tax return in California) or paying tax on their behalf at the highest California rate. This “nonconsenting nonresident” tax is reported and paid with Form 568.
Suspension, Forfeiture, and Penalties
Failing to file a tax return or pay required amounts can lead to suspension (domestic LLC) or forfeiture (foreign LLC). During suspension, the entity loses key legal rights in California, and additional penalties may apply. For 2013 and later, nonregistered foreign LLCs doing business in the state can also face a minimum $2,000 penalty.
Step-by-Step (High Level)
Step 1: Confirm You Should File Form 568
Verify your entity type, tax classification, and California footprint. If your LLC is taxed as a partnership or disregarded entity and meets California activity or registration tests, California Form 568 (2013) is the correct return to file a tax return for the year.
Step 2: Gather Financial and Member Data
Collect federal Form 1065 (if applicable), financial statements, California-source income details, and records of member capital, distributions, and ownership percentages. You’ll also need prior-year data and any California-specific adjustments that affect your tax liability.
Step 3: Complete Schedule B and Schedule IW
Use Schedule B to report income and deductions, including gross receipts, cost of goods sold, and ordinary business expenses. Complete Schedule IW (LLC Income Worksheet) to compute total California income, which drives the LLC fee brackets and the amount reported on Form 568.
Step 4: Prepare Schedule K and Schedules K-1 (568)
Schedule K summarizes all members’ distributive share items, including income, deductions, credits, and adjustments. Then prepare Schedule K-1 (568) for each member, allocating amounts based on ownership percentages expressed as decimals. Members use these to file their own income tax returns.
Step 5: Answer All Questions and Compute Taxes
Complete the yes/no questions on Sides 2 and 3 about ownership changes, real property, and special situations. Then calculate the $800 annual tax (if not already paid), LLC fee, nonresident member tax, penalties, and interest. Apply payments and credits to arrive at any balance due or overpayment.
Step 6: Sign, File, and Distribute K-1s
A member or manager must sign the return under penalty of perjury. E-file if prepared using software, or mail a paper return if permitted. Provide each member with a copy of their Schedule K-1 promptly so they can file a tax return accurately and on time.
Common Mistakes and How to Avoid Them
- Assuming no filing is needed when there’s no activity
If your LLC is registered or doing business in California, you generally must file Form 568 and pay the $800 tax until you formally cancel the entity. - Mixing up Form 568 and Form 565
LLCs use Form 568; partnerships and LLPs use Form 565. The only common exception is some nonregistered foreign LLCs with California income but not “doing business,” which may file Form 565. - Paying the $800 tax with the return instead of with FTB 3522
The annual tax is due early in the year, separate from the return, and late payment increases your tax liability through penalties and interest. - Calculating the LLC fee on net income
Use total California-source income before deductions, and follow Schedule IW carefully to avoid underpayment penalties. - Omitting or incompletely preparing Schedules K-1
Every member needs a complete Schedule K-1 (568) with correct percentages and address information. - Failing to handle nonresident member consent or withholding
Either secure Form FTB 3832 from nonresidents or pay tax on their behalf at the highest rate as part of your filing requirements. - Stopping filings without formally dissolving
Until you file a final return and cancel with the Secretary of State, the $800 annual tax continues each year and can compound into a sizable past due return problem.
What Happens After You File
After receiving California Form 568 (2013), the FTB processes the return, checks schedules and math, and matches it with payments such as the annual tax and estimated LLC fee. For e-filed returns, this often happens more quickly than for paper filings.
Each member then uses their Schedule K-1 (568) to report their share of LLC items on a California individual income tax return or business return. The FTB can cross-check those K-1 amounts against member filings, which is why consistent reporting is important.
If your LLC overpaid, the FTB issues a refund or applies the credit to a future year. If you underpaid the annual tax, LLC fee, or nonresident member tax, you’ll receive a notice showing additional income tax, penalties, and interest. Ignoring these notices can escalate to enforced collection or entity suspension.
If the IRS later adjusts your federal return, you may need to amend California Form 568, especially if the changes affect California-source income or members’ filing requirements. Keep copies of Form 568, K-1s, and supporting schedules for at least four years, and maintain basis records longer to support future transactions.
FAQs
Do I owe the $800 annual tax even if my LLC had no income in 2013?
Yes. As long as your LLC is doing business in California, organized in California, or registered with the Secretary of State, the $800 annual tax applies regardless of income. The only way to stop this recurring tax liability is to file a final Form 568 and formally cancel the LLC with the Secretary of State.
What’s the difference between California Form 568 (2013) and Form 565?
Form 568 is for LLCs, including SMLLCs, that are treated as partnerships or disregarded entities for tax purposes. Form 565 is for traditional partnerships, limited partnerships, and LLPs. Using the wrong form can lead to filing requirements being treated as unmet and may delay processing.
How is the 2013 LLC fee calculated and when is it due?
The LLC fee is based on total California-source income before deductions. If that income is at least $250,000, you calculate the fee using the 2013 brackets and pay an estimated amount by the 15th day of the sixth month of the year using Form FTB 3536. The final fee is reconciled on Form 568, and underpayment may trigger a 10% penalty.
What are my responsibilities if I have nonresident members?
You must either collect Form FTB 3832 from each nonresident member, agreeing to file a California return, or pay tax on their distributive share at the highest California rate. That nonconsenting nonresident tax is reported and paid with California Form 568 (2013) and becomes part of your overall tax liability calculation.
What do I need to do to properly dissolve my LLC?
To fully shut down your LLC and stop the $800 annual tax, you must file a final Form 568, pay any remaining tax, fee, and penalties, and file the required cancellation documents (such as the Certificate of Cancellation) with the California Secretary of State. Simply ceasing operations or closing bank accounts is not enough to end your income tax obligations.
If the IRS audits my federal return and makes changes, must I amend Form 568?
Yes, if the federal changes affect your California income, LLC fee, or members’ California tax liability. In that case, you must file an amended California Form 568 within six months of the final federal determination and issue amended Schedules K-1 (568) so members can update their own returns if needed.
