Hi Lisa,
I'm operating as a sole proprietor now in California. If I form a single member LLC in the middle of the year, does that income get added to my sole proprietor income to calculate the franchise tax or is just the income that flows into the LLC after it is formed used for that calculation?
Thanks,
-Allen
I've already tried...
Answers
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Hi Allen-Your sole proprietorship income will NOT be included in the gross receipts for Franchise Tax purposes. Your sole-prop income will be reported on the Schedule C of your 1040 individual return. The LLC will need to file Form 568 with the state of CA and will include only revenue earned by that entity. To make yourself audit proof make sure that you make a very clean break in your operations. Pick a date to transition, file the appropriate ficticious business name, EIN request, business license, and open a new bank account. Hope that helps, please call me if I can help you further:)
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