By Robert D. Conca, Partner & Shahrzad Borna, Law Clerk of Shustak Reynolds & Partners, P.C. posted on Monday, August 8, 2022.

Robert D. Conca

Partner

Location: San Diego, California
Phone: (619) 696-9500 (Ext. 121)
Email: [email protected]

California’s Assembly Bill 85

In the wake of the COVID-19 pandemic, California enacted Assembly Bill 85 (“AB 85”) [1] during the 2020-2021 legislative session to make certain changes to the California Revenue Taxation Code [2].  Among those changes was the elimination of the first-year annual tax for Limited Liability Companies (“LLCs”), Limited Liability Partnerships (“LLPs”), and Limited Partnerships (“LPs”), that organize, register, or file with the Secretary of State after January 1, 2021 and before January 1, 2024.

How A.B. 85 is Helping LLC’S, LLP’S and LP’S

Before AB 85 was signed into law, corporations enjoyed a tax break for their first taxable year which did not apply to LLC, LLP, or LP business entities. Every corporation incorporated, qualified to transact business, or doing business in California, is generally subject to a minimum of $800 annual franchise tax, except for their first taxable year after incorporation. Aiming to remove a barrier to small business creation, AB 85 amended the California Revenue and Taxation Code to extend the first-year exemption to LLCs, LLPs, and LPs that organize, register, or file with the California Secretary of State, “on or after January 1, 2021, and before January 1, 2024. These organizations will not be required to pay the $800 annual tax until their second taxable year. [3] 

Form Your Business Entity Before January 2024

There are several advantages to forming a business entity: business owners can be protected from personal liability through limited liability companies; gain tax advantages; give certainty and structure to business operations, and present a professional image to customers, investors, and the public. AB 85 offers another advantage to registering California LLCs, LLPs and LPs formed before January 2024 by eliminating the first annual tax for your business.

If you are interested to learn more about forming a business entity and profiting from the AB 85 tax exemption, you may contact our firm’s partner, Robert D. Conca, at (619) 546-5589.

Shustak Reynolds & Partners, P.C. focuses its practice on securities and financial services law, corporate law, and complex business disputes.
We represent many investment advisors, financial professionals, broker-dealers, registered representatives, investors and businesses.
Attorney Robert D. Conca can be reached in the firm’s San Diego office at (619) 696-9500.

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