Common Mistakes: All Entity Types
Misclassifying Workers
Misclassifying Workers
Misclassifying Workers
Misclassifying Workers as Independent Contractors: Evaluate each worker that provides services to your business to ensure they are not your employee under California's strict ABC Test.
Sales Tax
Misclassifying Workers
Misclassifying Workers
Sales Tax Violations: If you sell physical products, you need a seller's permit and must pay the appropriate state, local and any district tax rates.
Use Tax
Misclassifying Workers
Use Tax
Use Tax Violations: If you buy or use something without paying California sales tax (i.e. out-of-state purchases, marketing give-aways, personal use of inventory) you may owe California use tax.
Common Mistakes: LLC's
Statement of Information
Statement of Information
Statement of Information
Failure to file Statement of Information: California LLC's must file a Statement of Information with the Secretary of State every two years.
LLC Tax
Statement of Information
Statement of Information
Missed LLC Tax: Each California LLC must pay a minimum Franchise Tax of $800 each year to the Franchise Tax Board.
LLC Fees
Statement of Information
LLC Fees
LLC Fees Violation: LLC's with total California income over $250,000 must estimate and pay additional LLC fees ranging from $900 - $11,790 each year.
Common Mistakes: Corporations
Statement of Information
Annual Meetings & Minutes
Statement of Information
Failure to file Statement of Information: California corporations must file a Statement of Information with the Secretary of State every year. (Nonprofits every 2 years)
Corporate Officers
Annual Meetings & Minutes
Statement of Information
Officers are Employees: All corporate officers are employees by statute, requiring the corporation to register with the EDD as an employer, set up a payroll tax account and submit payroll taxes.
Annual Meetings & Minutes
Annual Meetings & Minutes
Annual Meetings & Minutes
Failure to Hold Annual Meetings: All corporations are required to hold annual shareholder and Board of Director meetings and keep and maintain corporate minutes.
Common Mistakes: Nonprofits
Statement of Information
Charitable Trust Registry
Charitable Trust Registry
Failure to file Statement of Information: California nonprofits must file a Statement of Information with the Secretary of State every two years.
Charitable Trust Registry
Charitable Trust Registry
Charitable Trust Registry
Failure to Register: Every nonprofit accepting donations within California must file an initial registration with the Attorney General within 30 days and every year thereafter.
501(c)(3) Status
501(c)(3) Status
501(c)(3) Status
Failure to obtain 501(c)(3) Status: A nonprofit that does not apply for 501(c)(3) status and receive a Determination Letter from the IRS is not a tax-exempt entity, donors cannot deduct donations, and the nonprofit may not have volunteers.
Wage & Hour Laws
501(c)(3) Status
501(c)(3) Status
Failure to uphold Wage and Hour Laws: Nonprofits must comply with California wage and hour laws regarding minimum wage, overtime, worker classification, etc. for employees. To have volunteers, nonprofits must be 501(c)(3)'s and meet other requirements.