Question: My California LLC generates income from its business inside California. One of the members is a nonresident of California and another member is a company formed in a state other than California. I heard that my California LLC must file a California Franchise Tax Board Form 3832. Is that true and if if so, what is the Form 3832?
Answer: If your California limited liability company is taxed as a partnership for U.S. income tax purposes then it must file an FBT Form 3832 with the California Franchise Tax Board when it files its first FBT Form 568. The completed FTB Form 3832 must contain the following:
- The names and social security numbers (SSNs), individual taxpayer identification numbers (ITINs), or federal employer identification numbers (FEINs) of all members that are people who are not residents of California and companies that are not formed in California.
- The signature of each nonresident member evidencing member’s consent to the jurisdiction of the State of California to tax that member’s distributive share of income attributable to California sources. If the nonresident member has a spouse or registered domestic partner (RDP), the spouse / RDP must also sign the Form FTB 3832.
Anytime an existing California LLC acquires a member that is not a resident of California the LLC must obtain the nonresident’s consent and consent of the nonresident’s spouse or RDP if the nonresident is married and file the FTB Form 3832 with the LLC’s tax return for the year in which the nonresident acquired his/her/its membership interest.
Note: By signing and submitting the FTB Form 3832 to the California Franchise Tax Board, the nonresident member is alerting the FBT that it should expect the nonresident member to file an annual California income tax return and pay tax on all income earned by the LLC from inside California.
Warning: If a member fails to sign form FTB 3832, the LLC must pay tax on the member’s distributive share of income at that member’s highest marginal rate. Any amount paid by the LLC will be considered a payment made by the member.
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