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BulldogTom

Delaware LLC - what do I need to know

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One of my clients has been getting advice from the internet.   He set up a Delaware LLC without telling me.   Now he wants me to file the returns for him.   As far as I can tell, he did no business in the LLC in 2019, just set it up to get it ready for business  in 2020.   

He is a CA resident, and all the business will be in CA for the foreseeable future from what I understand.   I have no problems with the Fed return or the CA returns.   I just don't know what I need to do for DE.

Can someone give me a quick primer on DE LLC's with references on where I should go to get educated in a hurry?   Websites, publications, etc.

Thanks in advance.

Tom
Modesto, CA

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Is he an SMLLC?  Delaware piggybacks Federal law where he'd be a disregarded entity if that is the case and would file any DE activity on a DE nonresident individual return. If an SMLLC with no DE activity, I think no income tax filing is neded, and if DE ever questioned why no tax return was filed, it could be answered simply with a letter.

If he has partners, then file a DE partnership return, Form 300. It a simple 2-page form that has a column for Fed and a second for the activity within the state. There's a box to check indicating if are any nonresident partners. There's also the typical apportionment  methods if allocating within and without the state based on property, compensation, revenues.  The filing would also include the form 300 K-1, with columns for federal and within DE that correspond back to the Form 300. 

Domestic and foreign LLCs file an Annual Report  for the franchise tax due each June 1st to the Del Sec of State to keep the corporation active and in good standing. The State sends a letter each year to the address of record of the registered agent (he probably listed himself) containing the file & case numbers, and informing that this filing must be filed online. It's fairly straightforward and usually isn't part of our tax prep services unless the person needs help with it. It's a questionnaire type form with demographics of the corporation, who the officers are, when their term begins and ends, etc.  He'llprobably pay the minimum fee of $300, but tell him not to miss this deadline unless he wants to pay the penalty that is $200 plus interest at 1.5% per month on the tax and penalty.

He may need a business license in DE if there is activity here, and the type and cost depend on what his activity is.

Obtaining a business license here would trigger a gross receipts tax too, filed either monthly or quarterly. The first year of filing is always monthly and then the state does a lookback and those with smaller revenues are switched to quarterly. Each industry has it's own dollar exemption threshold before incurring tax but filing is still required. No penalty for late filing if no tax is due. This is also filed online, done through the Division of Revenue's site but can still be filed on paper and mailed in.

Let me know if you need links or web addresses for more info.

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