What California Form 568 (2023) Is For
California Form 568 (2023) is the annual tax return for Limited Liability Companies (LLCs) that are not taxed as corporations. The form reports income, deductions, and credits, calculates the $800 annual LLC tax, determines the LLC fee based on California-source income, and includes any tax owed for nonconsenting nonresident members.
Multi-member LLCs classified as partnerships and single-member LLCs (SMLLCs) disregarded for federal tax purposes must file this return if they are doing business in California, organized in the state, or registered with the Secretary of State. Although most income and losses pass through to members, California still imposes entity-level charges, making Form 568 both informational and a tax computation document.
When You’d Use California Form 568 (2023)
You file California Form 568 (2023) if your LLC meets any of these conditions:
- Organized in California
- Registered with the Secretary of State
- “Doing business” in the state under California thresholds
This includes many foreign LLCs that exceed California sales, property, or payroll thresholds, even if they had little or no net income.
For the 2023 tax year:
- Multi-member LLCs and SMLLCs owned by pass-through entities: File by March 15, 2024.
- SMLLCs owned by individuals, trusts, estates, or C corporations: File by April 15, 2024.
If a due date falls on a weekend or holiday, the deadline moves to the next business day.
California grants an automatic extension—seven months for partnership-style filers and six months for other SMLLCs. However, this extension covers filing only. The $800 annual tax, LLC fee, and nonconsenting nonresident tax are still due by the original deadline. Late payments generate penalties and interest.
You also use Form 568 to amend a return. Mark the amended box, attach corrected Schedules K-1 (568), and include a statement with each change. If the IRS adjusts the federal return, California generally requires an amended Form 568 within six months.
Key Rules or Details for 2023
California conformity and nonconformity
California conforms to the Internal Revenue Code as of January 1, 2015, so many newer federal rules do not apply. Important differences include:
- No federal qualified business income deduction (IRC §199A)
- Section 179 expensing capped at $25,000 with a $200,000 phase-out
- Like-kind exchanges limited to real property only
- Additional reporting for commercial cannabis businesses on Form FTB 4197
Annual LLC tax and first-year exemption
Most LLCs owe the $800 annual tax each year they operate, are registered, or are organized in California. Payment is due by the 15th day of the fourth month of the taxable year using Form FTB 3522.
A first-year exemption applies only to LLCs that began doing business or registered in taxable years 2021–2023. LLCs formed in 2024 or later do not receive this exemption.
LLC fee based on California income
LLCs with California-source income of $250,000 or more must pay the LLC fee using Schedule IW. For 2023, fee tiers include:
- $900 for $250,000–$499,999
- $2,500 for $500,000–$999,999
- $6,000 for $1,000,000–$4,999,999
- $11,790 for $5,000,000 or more
Estimated fee payments are due by the 15th day of the sixth month using Form FTB 3536. Underpayment triggers a 10% penalty.
Doing business thresholds
For 2023, an LLC is considered “doing business” in California if it exceeds:
- $711,538 in California sales
- $71,154 in California property
- $71,154 in California payroll
or 25% of total worldwide amounts.
Nonresident members
LLCs must obtain nonresident consents (Form FTB 3832 or the SMLLC consent section). If a member refuses, tax must be computed on Schedule T at the highest marginal rate.
Step-by-Step (High Level)
Step 1: Determine your LLC classification
Confirm whether your LLC is taxed as a partnership, disregarded entity, or corporation. If taxed as a corporation, file Form 100 or 100S instead of Form 568.
Step 2: Calculate California-source income
Complete Schedule IW to determine whether the LLC must pay the income-based fee and estimate the amount owed.
Step 3: Pay the $800 annual tax
Use Form FTB 3522 to pay by the 15th day of the fourth month of the taxable year. Do not send this payment with Form 568.
Step 4: Complete Form 568 and schedules
Provide identifying information on Side 1 and complete all required schedules.
- Multi-member LLCs: Prepare Schedule B, Schedule K, and a Schedule K-1 (568) for each member.
- SMLLCs: Complete the SMLLC information section; if income or loss exceeds $3 million, schedules B and K may also be required.
Use Schedule T if you must pay nonresident member tax.
Step 5: Reconcile payments and sign
Report estimated payments, fee amounts, and tax liabilities. An authorized member or manager must sign and date the return.
Step 6: File and distribute K-1s
E-file the return if software is used. Provide each member with a Schedule K-1 (568) by the filing deadline.
Common Mistakes and How to Avoid Them
- Paying the annual tax with Form 568
Always pay with Form FTB 3522. - Missing the original payment deadline
Extensions do not extend time to pay taxes or fees. - Incorrectly determining LLC classification
Filing Form 568 instead of Form 100/100S or vice versa causes delays. - Underpaying the LLC fee
Use Schedule IW accurately and pay estimates timely. - Missing or mismatched Schedules K-1
Totals must reconcile with Schedule K. - Failing to get nonresident consents
Schedule T tax applies if consents are missing. - Wrong SOS or FEIN numbers
This can trigger processing holds or notices.
What Happens After You File
The Franchise Tax Board (FTB) posts the return, applies payments, and cross-matches Schedule K-1 (568) data to each member’s individual income tax return. If items do not match, the FTB may issue notices or initiate an examination.
The statute of limitations generally lasts four years from the due date or filing date, whichever is later. It extends when federal changes are not reported. Failing to file or pay can lead to suspension or forfeiture, restricting the LLC’s ability to conduct business until all obligations are satisfied.
FAQs
Do I have to file California Form 568 (2023) if my LLC had no income?
Yes. LLCs that are organized, registered, or doing business in California must file and pay the annual tax unless a first-year or short-period exemption applies.
What is the difference between the annual tax and the LLC fee?
The $800 annual tax applies to nearly all LLCs, regardless of income. The LLC fee applies only when California-source income reaches $250,000 or more.
Can I e-file Form 568 and pay electronically?
Yes. Most entities that use software must e-file. Payments can be made by electronic funds withdrawal, Web Pay for Businesses, credit card, or by mailing vouchers.
Do SMLLCs issue Schedule K-1 (568)?
No. SMLLCs do not issue K-1s. The owner reports all income and deductions directly on their individual income tax return.
When should I amend Form 568?
Amend when you find an error, reallocate items among members, or when the IRS adjusts the federal return. Attach amended K-1s and a statement explaining each change.
How can I stop owing the $800 annual tax?
You must cancel the LLC with the Secretary of State and file a final Form 568. The LLC remains liable until both steps are complete.
