Academic journal article Journal of Accountancy

Limited Liability Companies

Academic journal article Journal of Accountancy

Limited Liability Companies

Article excerpt

LLC Fees in California

In 1994, California enacted legislation that allowed the formation of limited liability companies (LLCs) in the state. In addition, the legislation included a provision that imposed a yearly fee on LLCs that were formed in California or were registered to do business in California. The fee's amount was based on an LLC'S business income from both within and outside California (i.e., worldwide income).

The calculation of the fee based on worldwide income was challenged by an LLC that was registered in California but did no business there. In 2006, the California Superior Court for San Francisco County held that the fee was actually a tax and was unconstitutional because an LLC's income was not fairly apportioned between California activities and out-of-state activities in calculating the fee. (39) In 2008, a California Court of Appeal affirmed the court's decision. (40)

In anticipation of losing its appeal in the Northwest Energetic case, the California legislature amended CA Rev. & Tax. …

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