What California Form 568 (2017) Is For
California Form 568 is the annual return LLCs use to report income, deductions, gains, losses, and other financial activity to the Franchise Tax Board (FTB). The form applies to LLCs taxed as partnerships and to single-member LLCs (SMLLCs) that are disregarded for federal purposes but still must file in California. Form 568 also captures the $800 annual tax and any LLC fee that applies when total California income reaches required thresholds.
Multi-member LLCs use Form 568 to prepare Schedule K-1 (568) for each member. These schedules report each member’s distributive share of income, deductions, and credits. SMLLCs complete special sections on Form 568 to report activity that ultimately flows to the owner’s return. LLCs taxed as corporations do not file Form 568 and instead use Form 100 or Form 100S.
The form also covers the nonconsenting nonresident members tax. When a nonresident member will not sign Form FTB 3832 consenting to California taxation, the LLC must pay tax on that member’s share at the highest marginal rate. This ensures California can assess tax on income sourced to the state.
When You’d Use California Form 568 (2017)
Any LLC doing business in California, registered in California, or organized under California law must file Form 568 for 2017—even if it earned no income. Registration alone creates a filing requirement until the entity formally dissolves and cancels with the Secretary of State. Some foreign LLCs that are not doing business in California but earn California-source income may instead file Form 565.
For 2017, LLCs taxed as partnerships filed Form 568 by the 15th day of the third month after the tax year ended—March 15, 2018, for calendar-year filers. SMLLCs owned by individuals, estates, or trusts followed the 15th-day-of-the-fourth-month deadline, which for 2017 fell on April 17 due to the Emancipation Day holiday.
California grants an automatic seven-month extension to file, but not to pay. The $800 annual tax and any LLC fee must be paid on time, even if the return will be filed later. Form FTB 3522 is used to pay the annual tax, while Form FTB 3536 is used for estimated LLC fee payments due by the 15th day of the sixth month. Amended returns are required when errors are discovered or when IRS adjustments affect California amounts.
Key Rules or Details for the 2017 Tax Year
$800 annual tax
Every LLC doing business in or registered with California owes the $800 annual tax. It is due by the 15th day of the fourth month of the taxable year and is nondeductible. The obligation continues until the LLC fully dissolves and cancels with the Secretary of State. One limited exemption applied to certain deployed military owners for tax years 2010–2017.
LLC fee thresholds
LLCs owe an LLC fee when total California income—before deductions—reaches $250,000 or more. For 2017, the fee schedule was:
- $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
The fee is calculated using Schedule IW. The FTB may combine income from related LLCs if they appear structured to avoid fee liability.
California–federal differences
California conforms to the Internal Revenue Code as of January 1, 2015, so many federal provisions effective after that date do not apply. California does not conform to:
- bonus depreciation for most property
- domestic production activities deduction
- energy-efficient commercial buildings deductions
- qualified small business stock provisions under IRC §§1045 and 1202
These differences require adjustments on Form 568 and on member returns.
Accounting methods, periods, and nonresident rules
LLCs taxed as partnerships generally cannot use the cash method if they have corporate members, high gross receipts, or meet tax shelter criteria. Nonresident members must sign Form FTB 3832 or the LLC must pay tax on their behalf using Schedule T. Signing the consent does not exempt the member from filing a California return.
Step-by-Step (High Level)
Step 1: Gather financial and federal tax documents
Collect federal Form 1065 (if applicable), financial statements, ownership percentages, capital contribution records, California-source income information, and prior-year filings.
Step 2: Complete basic LLC information
Enter the LLC’s legal name, California Secretary of State file number, FEIN, business address, and tax year dates. Answer questions about ownership changes, nonresident members, final or initial filings, and business activity.
Step 3: Report income, deductions, and member allocations
Multi-member LLCs complete Schedule B and Schedule K, then prepare Schedule K-1 (568) for each member. Single-member LLCs complete the SMLLC section on Side 3. These entries determine what flows to each member’s personal or business return.
Step 4: Calculate the annual tax, LLC fee, and nonresident taxes
Use Schedule IW to compute the LLC fee and enter the amount on Form 568. Enter the $800 annual tax separately. If any nonresident members did not consent via Form FTB 3832, calculate their tax on Schedule T.
Step 5: Apply apportionment and attach schedules
LLCs with income both inside and outside California complete Schedule R using the single-sales factor apportionment rules. Attach required schedules, including Schedule D (568) for capital gains, Schedule EO (568) for pass-through entity ownership, and others listed in the instructions.
Step 6: Sign and file the return
An authorized member or manager must sign the return. Paid preparers must sign and include their PTIN. File electronically or mail the return to the FTB, ensuring all taxes and fees were paid on time.
Common Mistakes and How to Avoid Them
- Not filing because the LLC had no activity
- Registration alone requires annual filing and payment
- Confusing payment deadlines
- Pay the annual tax with Form FTB 3522 and the estimated fee with Form FTB 3536
- Calculating the LLC fee using net instead of total income
- Base the fee on total California income before deductions
- Failing to obtain Form FTB 3832 from nonresident members
- Otherwise, the LLC must pay tax on their behalf
- Using federal Schedule K-1 instead of Schedule K-1 (568)
- California requires its own member schedule
- Assuming SMLLCs do not need to file
- Disregarded entities must file Form 568 every year
- Submitting incomplete ownership information
- Verify member names, addresses, and percentages before filing
What Happens After You File
Once the FTB receives the return, it processes the filing and issues refunds or bills as needed. Electronic returns typically process faster. If information is missing or unclear, the FTB may request documentation such as federal returns or Revenue Agent’s Reports. The FTB generally has four years from the due date or filing date to assess additional tax.
Members use their Schedule K-1 (568) to prepare their individual or business California returns. Each member must file a return reporting their share of income, even if the LLC paid tax on behalf of a nonconsenting nonresident.
LLCs must keep detailed records—including financial statements, operating agreements, tax payments, and capital contribution documentation—for at least four years. Basis records should be kept indefinitely.
FAQs
Do I need to file Form 568 if my LLC had no income in 2017?
Yes. An LLC registered with the California Secretary of State must file Form 568 until it formally dissolves and cancels its registration, even with zero activity.
What is the difference between the annual tax and the LLC fee?
The annual tax is a flat $800 due from every LLC doing business in or registered in California. The LLC fee applies only when California income is $250,000 or more and increases based on income tiers.
When is the annual tax due?
It is due by the 15th day of the fourth month of the taxable year. For calendar-year LLCs in 2017, the due date was April 15, 2017.
Does a single-member LLC disregarded for federal tax purposes still file Form 568?
Yes. All SMLLCs must file Form 568 and complete the Single Member LLC sections, even though income flows through to the owner’s return.
Can members deduct the annual tax or LLC fee?
No. These charges are nondeductible state taxes paid by the LLC. They do not reduce member-level income.
What if a nonresident member refuses to sign Form FTB 3832?
The LLC must compute and pay the nonconsenting nonresident tax using Schedule T. The member still must file a California return.
For more information, visit the FTB’s Form 568 page: https://www.ftb.ca.gov/forms/2017/568.html
