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  1. #1
    adaliu7 is offline Junior Member
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    Mar 2010
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    LLC: Avoid California Franchise Tax

    What is the name of your state (only U.S. law)? California

    I am currently in the process to obtain my Real Estate Broker's License in California, and trying to be ahead of the game by establishing a holding company as Single-Member LLC.

    With many research, it seems like to establish a Single-Member LLC, or to do business, in California will be subject to a minimum $800 Franchise Tax regardless if the company is active per year.

    There are few alternative that I found to avoid the $800 Franchise Tax:

    (1) Incorporate in WY, and establish Doing Business As(DBA) in California, however unless deactivate the DBA in California, I am still obligated to the $800 Franchise Tax. But the advantage to incorporating in WY is I can continue establish the company credit while the DBA in California is deactive, or not to apply DBA at the first place, and maybe sell the incorporated company to shelfing companies in the future.

    (2) Incorporate in CA as in Single-Member LLC to tax as Sole Proprietorship by default. This seems feasible at the beginning since the company would not be operating, and the service is not expose to liability since it is not operating.

    Here is my question: If I perform latter choice (2) Form an Single-Member LLC as Sole Proprietorship, can I later change the tax status to Corporation without reforming the structure of the company?

    Or do you have other suggestions?
    Last edited by adaliu7; 03-07-2010 at 10:57 AM.
  2. #2
    tranquility is offline Senior Member
    Join Date
    Mar 2006
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    18,287
    I think you need to see an attorney to review your structure. I am uncertain as to what advantages you will have transferring to corporate taxation or what you are really asking. Also, you might review the legal issues related to incorporation and being a broker.
  3. #3
    guamish1 is offline Junior Member
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    Mar 2010
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    response

    I was just wondering if you got a response for your question. I would also like to know how this can be done, becuase I'm in the same situation.

    thanks,

    Ray

    Quote Originally Posted by adaliu7 View Post
    What is the name of your state (only U.S. law)? California

    I am currently in the process to obtain my Real Estate Broker's License in California, and trying to be ahead of the game by establishing a holding company as Single-Member LLC.

    With many research, it seems like to establish a Single-Member LLC, or to do business, in California will be subject to a minimum $800 Franchise Tax regardless if the company is active per year.

    There are few alternative that I found to avoid the $800 Franchise Tax:

    (1) Incorporate in WY, and establish Doing Business As(DBA) in California, however unless deactivate the DBA in California, I am still obligated to the $800 Franchise Tax. But the advantage to incorporating in WY is I can continue establish the company credit while the DBA in California is deactive, or not to apply DBA at the first place, and maybe sell the incorporated company to shelfing companies in the future.

    (2) Incorporate in CA as in Single-Member LLC to tax as Sole Proprietorship by default. This seems feasible at the beginning since the company would not be operating, and the service is not expose to liability since it is not operating.

    Here is my question: If I perform latter choice (2) Form an Single-Member LLC as Sole Proprietorship, can I later change the tax status to Corporation without reforming the structure of the company?

    Or do you have other suggestions?

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