CALIFORNIA — An appeals panel has ruled that a limited liability company (LLC) must pay California’s annual minimum tax even if it earned no income or conducted no business in the state that year.
Under California law, an LLC must pay the $800 annual minimum tax if it is either doing business in the state, organized in the state, or registered with the Secretary of State — regardless of income.
In a precedential decision, the California Office of Tax Appeals upheld a Franchise Tax Board assessment.
It requires APlusLives (A+Lives) L.L.C. to pay the $800 annual minimum LLC tax for the 2020 tax year. The ruling also included associated penalties and fees.
LLC did not file cancellation
APlusLives argued that it should not owe the tax because it did not generate income during 2020.
The company said it was its first taxable year, and its taxable period lasted only 15 days, so it claimed it was exempt from the annual tax.
Administrative Law Judge Veronica I. Long found that the LLC’s articles of organization were filed with the California Secretary of State in 2019 and remained in effect through 2020.
Because the LLC had not filed a certificate of cancellation, the panel concluded it had a taxable year covering all of 2020 and was therefore subject to the annual minimum tax.
May set precedent for future disputes
The tax board initially proposed an $800 minimum tax, a $200 demand penalty, a late‑filing penalty, and a filing enforcement fee after APlusLives failed to file a return.
However, the panel found that one penalty—the per‑partner late‑filing fee—was wrongly applied, since it only applies to partnerships.
The ruling on the annual tax is designated as a precedential opinion.
It may serve as guidance for future disputes about LLC tax obligations in California.
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