Legislature Imposes New Penalty On LLCs

As I discussed in this earlier post, “transacting intrastate business” is not the same as “doing business” in this state. Foreign corporations and limited liability companies must register with the Secretary of State if they transact intrastate business. Even though foreign corporations and LLCs are not transacting intrastate business in California, they may be considered to be doing business here. The Corporations Code defines and uses the phrase ”transact intrastate business” (Sections 191 and 17001(a)) while the Revenue and Taxation Code defines and uses phrase “doing business” (Section 23101(a)).

Previously, California imposed a $2,000 per taxable year penalty for failure to file a return on a foreign corporation that failed to qualify to do business in California, or any corporation whose powers, rights or privileges have been forfeited or suspended, and that is doing business in California (unless the failure to file is due to reasonable cause). Cal. Rev. & Tax Code § 19135. Limited Liability Companies were not subject to this penalty. Late in last year’s session Assembly Member Skinner amended AB 318 to extend this penalty to both foreign and domestic LLCs. The Franchise Tax Board estimates that this will add an additional $400,000 this fiscal year to the state’s coffers.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Allen Matkins Leck Gamble Mallory & Natsis LLP | Attorney Advertising

Written by:


Allen Matkins Leck Gamble Mallory & Natsis LLP on:

Popular Topics
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.