What California Form 568 (2015) Is For
California Form 568 is the annual state return that Limited Liability Companies (LLCs) taxed as partnerships must file with the Franchise Tax Board (FTB). Because most LLCs are pass-through entities, income tax is paid by the members, not the LLC itself, but Form 568 reports the LLC’s activity and calculates certain entity-level taxes and fees.
Form 568 reports total California income, calculates the $800 annual LLC tax, computes any additional LLC fee based on total California income, and reports tax paid on behalf of nonconsenting nonresident members. It also supports the preparation of each member’s Schedule K-1 (568), which shows their share of income, deductions, credits, and other items for their own income tax returns.
When You’d Use California Form 568 (2015)
You must file Form 568 for 2015 if your LLC does business in California, is organized in California, is registered with the California Secretary of State, or has California-source income. This applies to both multi-member LLCs and single-member LLCs (SMLLCs), unless the LLC elected corporate tax treatment and instead files Form 100.
For calendar-year LLCs, the 2015 Form 568 is due April 15, 2016 (the 15th day of the fourth month after year-end). California provides an automatic six-month filing extension, moving the deadline to October 15, 2016, but the extension does not postpone payment of taxes, the $800 annual tax, or the LLC fee. LLCs that existed 15 days or less and did no business in that period generally do not have to file.
Late or amended filings are common situations for using Form 568. If you miss the deadline, the FTB can assess a per-member monthly penalty and penalties on unpaid tax. If you discover errors or your federal partnership return is changed by the IRS, you must file an amended Form 568 and issue corrected Schedules K-1 (568), usually within six months of the final federal determination.
Key Rules or Details for 2015
The $800 Annual LLC Tax
Most LLCs doing business in or registered with California must pay an $800 annual tax, even if they have no income or are inactive. For calendar-year LLCs, this tax is due by April 15, 2015 (the 15th day of the fourth month after the tax year begins) and is paid with Form FTB 3522, not with Form 568 itself. The $800 tax is not deductible as a business expense on the LLC or the members’ returns.
A narrow military exemption applies through 2017 for certain small SMLLCs owned solely by deployed U.S. Armed Forces members. If total income is under $250,000 and the business operates at a loss or stops operating while the owner is deployed, the $800 tax may be waived.
The LLC Fee Based on Total Income
In addition to the $800 tax, LLCs with total California income of $250,000 or more must pay an LLC fee. For 2015, the fee is based on tiers of total income:
- $250,000–$499,999: $900
- $500,000–$999,999: $2,500
- $1,000,000–$4,999,999: $6,000
- $5,000,000 and over: $11,790
You must estimate this fee and pay it by the 15th day of the sixth month of the tax year using Form FTB 3536. Underpaying by more than the safe harbor can trigger a 10% penalty on the underpayment.
Rules for Single-Member LLCs
SMLLCs are disregarded for income tax purposes, so income is reported directly on the owner’s tax return, but they still must file Form 568 and pay the $800 tax and LLC fee when applicable. SMLLCs generally complete only Sides 1–3 and Schedule IW (Side 7), and do not prepare Schedules K or K-1. If the SMLLC has income, loss, or distributive items of $3 million or more, it must also complete Schedules B and K.
Federal–California Differences and 2015 Updates
California conforms to the Internal Revenue Code as of January 1, 2015, but does not follow many newer federal provisions. For 2015, California does not allow certain federal benefits such as the domestic production activities deduction, bonus depreciation, some qualified small business stock exclusions, and electing large partnership rules. You cannot simply copy figures from federal Form 1065; California adjustments are required.
For tax years beginning in 2015, payments and credits are applied to use tax first, the Natural Heritage Preservation Credit carryover period extends to 15 years, and certain earthquake safety improvements can be excluded from income. California also generally requires e-filing of Form 568 if you use tax preparation software.
Step-by-Step (High Level)
Step 1: Confirm You Must File Form 568
Determine whether your LLC is doing business in California, organized or registered in the state, or earning California-source income. Confirm you have not elected corporate taxation, which would require filing Form 100 instead.
Step 2: Gather Key Records
Collect your federal partnership return (Form 1065), member information, income and expense records, California-source income data, balance sheet details, and proof of any prior payments made with Forms FTB 3522, 3536, or 3537.
Step 3: Complete Schedule IW (Income Worksheet)
Start with Schedule IW on Side 7, which computes total California income for LLC fee purposes. This figure flows to Line 1 of Form 568 and is essential for calculating the LLC fee.
Step 4: Fill Out Entity and Tax Sections
Enter basic LLC information, answer all yes/no questions on Sides 2 and 3, and compute:
- LLC fee based on Schedule IW
- $800 annual tax
- Tax on nonconsenting nonresident members from Schedule T
Report all prior payments, withholding, and credits to determine balance due or overpayment.
Step 5: Prepare Required Schedules
For multi-member LLCs, complete Schedules K and K-1 (568) for each member, plus any required Schedules B, L, M-1, M-2, and Schedule T. Ensure the number of K-1s matches the number of members shown on the form.
Step 6: Sign and File, Then Provide K-1s
An authorized member or manager must sign under penalty of perjury. E-file if you used software, or mail a paper return if eligible. After filing, send each member their Schedule K-1 (568) so they can file their own income tax returns.
Common Mistakes and How to Avoid Them
- Skipping Schedule IW
Always complete the income worksheet first; it drives the LLC fee and Line 1 of Form 568. - Missing or mismatched Schedules K-1
Prepare a Schedule K-1 (568) for every member of a multi-member LLC; counts must match Question K. - Paying the $800 tax with Form 568
Pay the annual tax with Form FTB 3522 by the fourth month of the year, not when you file Form 568. - Forgetting the mid-year LLC fee payment
Estimate and pay the LLC fee with Form FTB 3536 by the sixth month to avoid a 10% underpayment penalty. - Copying federal numbers without adjustments
Review California’s conformity differences, especially for depreciation, credits, and special deductions. - Assuming no filing is needed when inactive
You must file and pay the $800 tax until the LLC is formally cancelled with the Secretary of State and a final return is filed.
What Happens After You File
Once Form 568 is filed, the FTB processes the return and may contact you for clarification, missing schedules, or documentation. Respond quickly to avoid extra penalties or collection actions. Members then use their Schedules K-1 (568) to complete their own returns and determine their share of California income tax.
If the LLC underpaid the $800 tax, LLC fee, or nonresident tax, the FTB will bill additional tax, penalties, and interest. Continued noncompliance can lead to suspension (for domestic LLCs) or forfeiture (for foreign LLCs), which restricts legal rights and can make contracts voidable. To end future annual tax obligations, you must both file a final Form 568 and complete cancellation with the Secretary of State.
If the IRS later changes your federal partnership return, you are required to file an amended Form 568 within six months if the changes affect California tax or fees. Keep all returns, schedules, and supporting records for at least four years, and longer for items like asset basis and ownership history.
FAQs
Do I owe the $800 annual tax even if my LLC had no income?
Yes. As long as your LLC is registered, organized, or doing business in California, the $800 annual tax applies, regardless of income or activity. The obligation continues every year until you file a final return and formally cancel the LLC with the Secretary of State or qualify for a specific exemption, such as the limited military exception.
When is the $800 tax due for the 2015 tax year?
For a calendar-year LLC, the $800 tax for 2015 is due April 15, 2015, which is the 15th day of the fourth month after the tax year begins. This due date is separate from the filing deadline for Form 568 and must be met using Form FTB 3522, even if you intend to file the return under an extension.
How is the LLC fee different from the $800 annual tax?
The $800 annual tax is a flat charge that applies to almost all LLCs in California. The LLC fee is based on total California income and only applies once that income reaches $250,000, with fees ranging from $900 to $11,790. Many LLCs pay both amounts in a year: the flat $800 tax plus the tiered LLC fee.
Do nonresident members have to pay California tax?
Nonresident members are taxable on their share of California-source income. The LLC can either obtain a consent from each nonresident member (Form FTB 3832) so they file their own returns, or the LLC must compute and pay tax for them at the highest California rate, reported on Schedule T and Line 4 of Form 568.
Does a single-member LLC have to file Form 568?
Yes. Even though an SMLLC is disregarded for income tax purposes and reports income on the owner’s return, it still must file Form 568 and pay the $800 tax and any applicable LLC fee. The filing is simplified, but the entity-level obligations remain.
What happens if I file late or don’t file at all?
Late filing can trigger a penalty of $18 per member per month (or part of a month) for up to 12 months, plus penalties and interest on unpaid tax. Continued failure to file or pay can lead to suspension or forfeiture of the LLC’s powers, rights, and privileges until all returns, taxes, fees, and penalties are brought current.
