Cancel Culture in a Petri Dish When Free Speech Mutates into Contract Interference You have your opinions. Must everyone else agree with you? How far will you go? Will you end up in court? If a business does something you don’t like, would you stage a boycott? Would...
The Q-Sub
A Qualified Subchapter S Subsidiary (Q-Sub) is an S-Corp that is 100% owned by a parent S-Corp. Both the parent entity and the Q-Sub can be a corporation or an LLC.
Section 1202
So what exactly is QSBS? Under Section 1202 of the Internal Revenue Code, a taxpayer may be exempt from paying capital gains tax when selling QSBS stock if they meet certain requirements.
California Does Something Right (Temporarily) for Small Business
- Engage in any transaction for the purpose of financial gain within California. (Even if you don’t live there.)
- Are organized or commercially domiciled in California
- Your California sales, property or payroll exceeds certain amounts.
Such broad explanations and definitions can make it extremely difficult for business owners to discern whether or not they must pay this tax. As well, there are ongoing battles in court in order to try to stifle the Franchise Tax Board’s broad interpretations. So even before the Coronavirus, these taxes have had the effect of discouraging business in the state.
But for now, everyone can go ahead and take a deep breath (albeit temporarily) when they form an LLC in California. California is changing its taxation policy to waive the $800.00 mandatory franchise tax for the first year on all new entities. LLCs, limited partnerships and limited liability partnerships that register in the years 2021, 2022 and 2023 will not have to pay the $800.00 in their first year of business. Through this change the state would be reducing the General Fund Revenue for California by about $50 Million dollars in 2020-21 and $100 Million dollars in 2021-22 and out years. The goal of the new legislation is “to help and reduce costs for first year California small business.” The legislation further notes that “…these taxes may stifle economic growth and job creation and may inhibit the formation of many small businesses.” Which ironically, may have some new business owners holding off to open a new entity to avoid paying the 2020 franchise tax, thereby stalling the California economy even more until 2021 when the tax exemption will be placed. California traditionally has about 250,000 LLCs, partnerships and sole proprietorships formed each year. Now, to try and keep economic growth from stalling, the $800.00 fee is temporarily waived on the first year for these entities along with corporations. (Hopefully without the cumbersome tax filing requirements.) The cost of doing any sort of business in California is very high. Waiving the $800.00 fee for an LLC’s first year is a good start. But why not make the waiver permanent? Corporations are excluded from the fee for the first year, and have been for years. Allowing LLC’s and other entities a similar permanent first year exemption would be wise policy.Ready to Form a California LLC?
Get a free 15 minute consultation with an Incorporating Specialist before you form a California LLC.
Cancel Culture in a Petri Dish
Cancel Culture in a Petri Dish When Free Speech Mutates into Contract Interference You have your opinions. Must everyone else agree with you? How far will you go? Will you end up in court? If a business does something you don’t like, would you stage a boycott? Would...
The Q-Sub
A Qualified Subchapter S Subsidiary (Q-Sub) is an S-Corp that is 100% owned by a parent S-Corp. Both the parent entity and the Q-Sub can be a corporation or an LLC.