What Form 568 (2017) Is For
Form 568 (2017) is used by limited liability companies (LLCs) to file their annual California tax return, known officially as the Limited Liability Company Return of Income. This form reports income, deductions, fees, and taxes to the California Franchise Tax Board for a specific taxable year. LLCs must file it, regardless of whether they are multi-member partnerships or disregarded entities, such as single-member LLCs.
When You’d Use Form 568 (2017)
Form 568 (2017) must be filed under a variety of circumstances that trigger a state filing obligation:
- Newly registered with the California Secretary of State: Even if no business activity has occurred, registration alone requires filing the form.
- Submitting a late return after the standard deadline: If the original due date has passed, Form 568 must still be filed to meet legal reporting requirements.
- Filing an amended return to correct or update prior submissions: An amended Form 568 must include proper documentation and check the relevant box for corrections.
- A multi-member entity LLC classified as a partnership requires reporting distributive share details using the California Schedule K-1.
- Single-member LLC disregarded for federal tax purposes: Even though income is reported on Form 1040, California still requires Form 568 with special SMLLC sections completed.
- LLC has California business activity, a business address, or a business bank account: These trigger California tax filing requirements, even for foreign entities registered elsewhere.
Key Rules or Details for 2017
Several key provisions under California law affected LLCs filing Form 568 for the 2017 tax year:
- The $800 annual tax applies regardless of income or activity: Every LLC registered or doing business in California must pay this tax unless formally dissolved under California Corporation Code Section § 1700-1702.
- An additional LLC fee applies based on total gross receipts: This fee is calculated using Schedule IW and must be estimated via Form FTB 3536 if total income exceeds $250,000.
- Nonresident members must consent or be taxed at the highest rate: If a member refuses to sign Form FTB 3832, the LLC must pay tax on their share using Schedule T.
- LLCs must conform to specific accounting methods: Entities may not use the cash method if they have corporate members, are tax shelters, or exceed $5 million in average receipts.
- California’s conformity to the Internal Revenue Code was partial: For 2017, conformity extended only to the federal code as of January 1, 2015, excluding deductions like bonus depreciation and energy-efficient credits.
Step-by-Step (High Level)
Form 568 (2017) requires a specific sequence of preparation and filing steps to meet California’s tax filing requirements:
- Gathering all records and prior filings: Collect documents such as federal Form 1040 (for SMLLCs), Form 1065 (for partnerships), business bank account records, gross receipts reports, and prior California tax return forms.
- Completing the LLC information section: Fill in the legal name, California Corporation Number, Employer Identification Number, business address, and submit a current Statement of Information (Form LLC-12).
- Preparing income, deduction, and ownership schedules: Multi-member LLCs must complete Schedule B, Schedule K, and California Schedule K-1 for each member; disregarded entities must report directly on Form 568.
- Reporting and apportioning out-of-state income: Use Schedule R to determine the amount of income subject to California tax when operating in multiple states.
- Calculating and entering LLC fee and annual tax amounts: Use Schedule IW to calculate the LLC fee, pay the $800 yearly tax using Form FTB 3522, and submit estimated fees on Form FTB 3536 if applicable.
- Documenting nonresident member compliance: Complete Schedule T if members refuse to sign Form FTB 3832 and include payment of their share of tax at the highest rate.
- Attaching required California tax forms and statements: Include applicable forms such as Schedule CA, Schedule T, Form FTB 3537, Form 8832, Form 1099, or the Reportable Transaction Disclosure Statement (Form 8886).
- Signing the return and providing contact information: An authorized manager or member must sign; paid preparers or business lawyers must include their PTIN and business email addresses.
- Submitting via approved filing channels: File online through a California Franchise Tax Board–approved software provider or mail the return using the address listed in the Business Entity tax booklets.
Common Mistakes and How to Avoid Them
- Assuming no income means no filing requirement: Every LLC registered in California must file annually until it is formally dissolved using Form LLC-4 or Form LLC-4/7, and a final return is accepted.
- Mixing up the annual tax payment deadline with the filing deadline: The $800 tax is due by the fourth month of the taxable year using Form FTB 3522, which is separate from the return’s submission deadline.
- Calculating the LLC fee using net income instead of gross receipts: The LLC fee must be based on total California-sourced income and correctly estimated using Form FTB 3536.
- Failing to collect Form FTB 3832 from nonresident members: If consent forms are not received, the LLC must pay the tax on each nonconsenting member’s behalf using Schedule T at the highest rate.
- Filing the wrong tax form for LLCs taxed as partnerships: Form 568 is required for California LLCs, while Form 565 applies only to certain foreign partnerships with California income but no registration.
- Submitting a federal Schedule K-1 (Form 1065) instead of a California Schedule K-1 (Form 568): California requires its own Schedule K-1 format, which must be completed and distributed to each member.
What Happens After You File
Once Form 568 (2017) is submitted to the Franchise Tax Board, the return is processed for compliance with the California Revenue and Taxation Code. Payments are applied or refunded based on the reported balance, and LLC members must use their California Schedule K-1 details when preparing individual tax returns, such as Form 540 or Form 540NR. If errors or questions arise, the board may contact you using the business email address listed on the return.
FAQs
Do I still need to file Form 568 (2017) if my LLC has no activity or income for the year?
Yes, every registered LLC must file the Limited Liability Company Return of Income each taxable year until it formally dissolves with the California Secretary of State.
What is the difference between Schedule C and Schedule K-1 (568)?
Schedule C is used by sole proprietors on federal returns, while Schedule K-1 (568) is issued to each LLC member to report their distributive share of income for California purposes.
Is Form 3536 required for all LLCs in California?
Form 3536 is only required if your LLC expects total California income of $250,000 or more and must prepay the estimated LLC fee based on that income.
Do I need a business license report for my LLC before filing Form 568?
While a business license report is not required for filing Form 568, holding a California Business License may indicate business activity that triggers tax filing requirements.
What if my business has employees under California Labor Code Section 3700?
If your LLC has employees, you may also need to carry workers’ compensation insurance and file additional California tax forms beyond Form 568.
