Is Your Closely Held Corporation or LLC Subject to California Reporting?

We have all heard the radio commercials for setting up a Corporation out of state. There could be adverse tax consequences for some Corporations and LLCs which are set up out of state, but the officers, board of directors or owners are California residents.
California is an aggressive state with regards to taxes.
The state will go after entities and their owners if they try to circumvent the California tax laws. Also, California takes aggressive positions with their interpretation of the laws.
All businesses doing business in California need to file California tax returns. California considers doing business in the State of California to include situations where out of state entities have officers, board of directors or owners who are California residents and the entity cannot prove that all management of the corporation takes place outside of California. This can be troublesome for the California resident who owns an out of state entity and the California resident is the only officer.
If you or someone you know owns one of these out of state entities make sure that competent advice is received from a CPA or tax attorney familiar with California tax issues.
Jerald Schneider is a Certified Public Accountant providing tax, accounting and financial advice for more than 30 years. He can be reached at 661-297-1072 or by e-mail at jerald@jeraldschneider.com.