What California Form 3832 (2018) Is For
California Form 3832 allows a Limited Liability Company to document each nonresident member’s consent to California taxing their distributive income share. The California Franchise Tax Board requires this form whenever California-sourced income flows through pass-through entities taxed under California law. The completed form is attached to Form 568 and supports the reporting necessary under the applicable provisions of the California Revenue and Taxation Code.
This consent does not replace individual California income tax responsibilities for affected members, including personal income tax filings on Form 540NR. Members must use correct taxpayer identification numbers, such as a Social Security number or Employer Identification Number, to ensure accurate processing. The Franchise Tax Board may assess tax liability against a California LLC when any nonresident member does not provide the required consent.
When You’d Use California Form 3832 (2018)
A California LLC uses California Form 3832 when it has nonresident members who must acknowledge California’s authority to tax sourced income. This applies to member-managed LLCs and manager-managed LLCs operating under an operating agreement consistent with the California Revised Uniform Limited Liability Company Act. Companies formed through the California Secretary of State must attach a completed Form FTB 3832 to Form 568 for each applicable year.
An out-of-state LLC transacting business in California, including a Nevada LLC, Delaware LLC, or Montana LLC, must provide this consent. The filing requirement also applies when new nonresident members join after the initial Articles of Organization are filed. The California FTB Form 3832 ensures compliance whenever an LLC generates California income, subject to relevant tax forms and regulations.
Key Rules or Details for 2018
Each nonresident member must sign the consent statement, including individuals using Individual Taxpayer Identification Numbers or Federal Employer Identification Numbers. Registered domestic partners living outside California must also sign if they hold an ownership interest recognized under California law. When any member refuses consent, the LLC pays franchise tax at the highest applicable rate and reports amounts on the California Schedule K-1.
Form 3832 must accompany the Limited Liability Company Return of Income to support the accurate allocation of California-sourced income. Non-consenting member taxes paid by the LLC may be later credited to the member through the required reporting procedures. These rules apply in conjunction with the requirements outlined in California Form 100, the Form 3832 instructions, and the referenced Internal Revenue Code provisions.
Step-by-Step (High Level)
- Step 1: The reviewer must identify all nonresident members of the California LLC and verify each required identifier under California law.
- Step 2: The entity’s compliance review should determine whether it operates as a member-managed LLC or a manager-managed LLC, as specified in its governing documents.
- Step 3: The filing process requires obtaining the correct Form FTB 3832 and reviewing requirements for out-of-state LLC members.
- Step 4: The preparer must list each nonresident member accurately and confirm all identifiers before attaching the documents to Form 568 or Form 100.
- Step 5: The company must retain supporting records and review any California FTB Form 590 or California FTB Form 588 obligations for future compliance.
Common Mistakes and How to Avoid Them
Filing errors frequently arise when entities submit required California forms without complete documentation or accurate identifying information. A proactive review of these issues strengthens compliance with California law and reduces the likelihood of processing delays. A clear procedural framework enhances consistency with the filing requirements applicable to pass-through entities.
- Missing Signatures: Filers submit Form FTB 3832 without all required nonresident signatures; the entity must obtain every signature before attaching the form.
- Incorrect Identification Numbers: Submissions contain mismatched Social Security numbers or Employer Identification Numbers; the filer must confirm all identifiers before filing Form 568 or Form 100.
- Outdated Form Versions: Entities must use the current version of the California FTB Form 3832, as the filing must match the version issued for the applicable year.
- Unattached Schedules: Required schedules supporting Articles of Organization and Operating Agreement details are omitted; the filer must include all schedules to maintain accuracy.
What Happens After You File
Once the LLC files Form 568 with the attached consent, the Franchise Tax Board records the authorization of the nonresident members. Any nonconsenting member tax paid by the LLC becomes a credit claimable by the member on Form 540NR. The information supports required California income tax assessments while helping verify compliance with California Revenue and Taxation Code Section 18633.5.
Members must file their own returns and include Schedule K-1 (568) received from the LLC for proper reporting. The LLC’s responsibility ends after filing unless amended California tax forms become necessary. If amounts were paid on behalf of nonconsenting individuals, the LLC may later recover those payments under its Operating Agreement.
Frequently Asked Questions
What is required for single-member LLCs?
A single-member California LLC classified as a disregarded entity completes consent directly on Form 568, because Form FTB 3832 applies only when multiple nonresident members hold interests.
What occurs when a member declines consent?
The California LLC reports the individual’s share on Form 568 and remits tax at the highest rate because missing consent triggers liability under California law.
Does consent remove separate filing duties?
Members must still file their individual returns, including Form 540NR when California income is allocated, and maintain supporting records consistent with Schedule IW requirements established for pass-through entities operating under California law.
May separate forms be used for different members?
An entity may submit multiple copies of Form FTB 3832 when privacy concerns exist, provided each nonresident member’s information matches Articles of Organization records maintained with the Secretary of State.
How long must signed documents be retained?
A California LLC is required to retain Form FTB 3832 with tax records for four years to satisfy examination requirements.
