Upkeeping Your LLC
Your LLC has some required upkeep and paperwork. Remember, LLCs are under the jurisdiction of your state, so each state's requirements and forms will be a little different. These examples are from California, but the principles are universal:
1) Statement of Information
2) Annual Report (In California, known as the LLC Franchise Tax)
3) Creating and sending Schedule K-1 forms.
1) You’ll need to submit a new Statement of Information. Basically update your contact info. (In California, this must be done every other year). You just go online, update the information, and pay the fee.
2) Then there’s what most states call the Annual Report. In California, this is called the Annual Franchise Tax. Both names are shitty. It’s not a report or a tax. It’s a damn fee. Call it what it is! Your LLC (if being taxed as a Sole Proprietor or Partnership) must pay an annual renewal fee. The average renewal fee is about $100, in California we pay $800. Usually the same as the startup fee. Payments are due by April 15th every year.
Also in California (and maybe other states), if your LLC has a certain level of income, you’ll have to pay an additional fee (okay maybe this one is more of a tax). This is not based off your company’s profit but your company’s gross receipts (basically all incoming money). And only gross receipts derived or attributed to California is counted.
$250,000 to $499,999 = $900
$500,000 to $999,999 = $2,500
$1,000,000 to $4,999,999 = $6,000
$5,000,000+ = $11,790
If you think you'll end up at this level of income, you must pay your additional fees in advance. Submit by June 15th using Form 3536 (Estimated Fees for LLCS).
There is one exception to this Franchise Tax and additional fee: being an S-Corp. An S-Corp is treated entirely differently. An S-Corp’s franchise tax is 1.5% of the company’s net income (profit only), with a minimum tax of $800. So you will also pay the $800 and possibly more.
Sole Proprietorship: $800 + Additional fee based on gross receipts.
Partnership: $800 + Additional fee based on gross receipts.
S-Corp: 1.5% of net profit ($800 fee minimum)
Here are all the forms you will need to file to make all this happen:
Form 3522 (LLC Tax Voucher) – Once again, a shitty name. This is the form used to pay your Annual Franchise Tax. This is where you send your $800. This is due by April 15th.
Form 568 (LLC Return of Income): You can view this as the "master" tax form for your LLC (Sole Proprietorship or Partnership). This form accounts for the income, withholding, taxes, and more. You will also pay any unpaid taxes. Once the year ends, this form must be submitted by March 15th.
Form 3536 (Estimated Fee for LLCS) – This has to do with those additional fees. You need to forecast ahead and evaluate your LLC’s annual gross receipts. You don’t need to file this form if you think your gross receipts will not total at least $250,000. But if you do think you’ll have that much, you must fill out this form. You will also have to send in your estimated fee. This is due halfway through the year, by June 15th.
Form 100S (S-Corp Return of Income): This is similar to Form 568 but for LLCs classified as S-Corps.
Form 100ES (Corporations Estimated Tax): This is similar to Form 3536 but for LLCs classified as S-Corps. This form is submitted quarterly.
3) Next you have to prepare tax documents for your own personal taxes. The main tax form we all submit for our personal income is Form 1040. But owning a business means you must submit additional paperwork.
If you’re a Sole Proprietorship, you will submit the IRS form Schedule C, which reports your profit or loss from the business. This form accompanies your main 1040 form.
Partners and owners of S-Corps don’t have it so easy, since you must divide up the profits among all the owners. A Partnership reports everything to the IRS using Form 1065. An S-Corp reports everything using Form 1120S. They are due March 15th. These forms will generate another document, known as a Schedule K-1.
A Schedule K-1 is a tax document used to report the incomes, losses, and dividends of an owner. You will prepare and send individualized K-1 documents to each owner (by March 15th). Each owner will then include their K-1 with their own personal tax return (due April 15th). If you're sick of all this shit, hire an accountant.