California syndicators/operators and the FTB tax arm

[Bryan Zuetel]

Because of the long arm of the California Franchise Tax Board and what they consider doing business in California, my LLC will be deemed to be doing business in California, since I'm managing the LLC from California, even if if the property is located outside of California. By doing business in California, the LLC may be subject to the heavy LLC franchise taxes of California.

For any syndicators/operators based in California, have you faced any resistance from potential investors to the LLC being deemed doing business in California and paying California LLC franchise taxes?

[Basit Siddiqi]

@Bryan Zuetel

I find it that most investor's will not care whether the fund pay's the California LLC Franchise tax. The minimum fee is $800. If the fund has 10 investors - the fee is $80 per person. Just factor it as a cost of doing business

While California deems the LLC is doing business in California doesn't necessarily mean that the fund will have California state sourced income.

If the LLC files a partnership return and all the payroll, property and sales are outside California - The LLC will not have any California state sourced income. As a result - the investors of the fund should get a California K-1 that is blank and they should not have a filing requirement with CA.