LLC and California minimum taxes

[bromion]

This question pertains to California.

I am a partner in a LLC registered in California. Our business address is in California. We formed the company in 2008 but never brought in any revenues (we spent minimally on the company out of our personal funds). We were unaware that we were supposed to be filing tax returns with the state and IRS as well as paying $800 per year to the state of California. We also never received any correspondence from the state regarding this.

This oversight was recently brought to my attention, though we still have no notices from the state. Since this company has no assets and never did, nor did we disburse any assets of any kind, are we (the owners) personally liable for the back taxes, fees, and possible penalties? If not, how do we legally escape from this LLC with minimal cost and headache?

Thanks for advice!

 

[davew128]

Maybe. There is case law wherein corporate shareholders in this situation can walk away without liability. The distinction between a corporation and LLC in this instance shouldn't matter, however nobody has tested it in the context of an LLC nor has FTB issued guidance on how they would approach it other than continuing to send bills.

 

[bromion]

Maybe. There is case law wherein corporate shareholders in this situation can walk away without liability. The distinction between a corporation and LLC in this instance shouldn't matter, however nobody has tested it in the context of an LLC nor has FTB issued guidance on how they would approach it other than continuing to send bills.

I am aware of the ruling and its implications. Has FTB given guidance on how they would approach this for a corporation (rather than LLC)? I can't find anything official.

In reading about the use of the Ralite decision, many things I have read suggest that one should file a final tax return but not dissolve the corporation. Why is that suggested? Without dissolution, the LLC will continue to accrue $800 yearly minimum taxes. Does dissolution have some drawback besides the filing fee?

Thanks!

 

[tranquility]

I am aware of the ruling and its implications. Has FTB given guidance on how they would approach this for a corporation (rather than LLC)? I can't find anything official.

In reading about the use of the Ralite decision, many things I have read suggest that one should file a final tax return but not dissolve the corporation. Why is that suggested? Without dissolution, the LLC will continue to accrue $800 yearly minimum taxes. Does dissolution have some drawback besides the filing fee?

Thanks!

https://www.ftb.ca.gov/businesses/faq/Closing_a_Business_Entity.shtml

Pay all tax balances, including any penalties, fees, and interest.

 

[bromion]

https://www.ftb.ca.gov/businesses/faq/Closing_a_Business_Entity.shtml

Thank you. Therein:
https://www.ftb.ca.gov/businesses/personal_responsiblity.shtml

So since we have had no disbursements from the LLC to anyone, then no individual is responsible for the debts and taxes of the LLC. Is that correct?

 

[tranquility]

Some would say. No where do I ever see a clear answer.