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California LLC Incentive for 2021


For those struggling with income for the past year, seeking employment can be challenging. Especially for an economy with some uncertainty between COVID-19 and business shutdowns. Luckily, with Governor Newsome's new Budget Act, a beacon of hope has appeared in these dark times for new business owners. As bitter as it has been to lose so many local businesses in California, within a six to twelve month period, since the beginning of the pandemic, providing this incentive may, hopefully, bring life back into the cities decimated by this plague.

According to ca.gov, "...the Budget provides...$75 million for loan loss mitigation and reducing the cost of capital for small businesses to address gaps in available federal assistance. These funds will be administered by the California Infrastructure and Economic Development Bank. The Budget also expands the $800 Minimum Franchise Tax exemption for first-year corporations to all businesses – removing a barrier to small business creation for all types of small businesses." [read more]

And Nolo.com elaborates the Franchise Tax exemption with, "Under the new rules, for the period starting January 1, 2021 and ending December 31, 2023, any LLC, LP, or LLP that files, registers, or organizes to do business in California is exempt from the state’s $800 minimum annual franchise tax for its first taxable year. Under prior law, only corporations were exempt from the minimum franchise tax in the first year after they registered with the state. The purpose for the change was to remove a barrier to small business creation." [read more]

Allowing a pass for one year, limited liability companies are able to operate as though they were still DBA's (Doing Business As). This may seem redundant for many that already operate without an incorporation, but plenty of freelancers have had the California Assembly Bill 5 (AB5) of 2019 slow down business for them, already demanding their tax forms to be reorganized for the state's new employment protection plans. 

There were advantages, there were disadvantages. But in either case, LLC's have become a necessity for Californians. On the brighter side, these small companies are protected legally, and tax deduction is almost 100% of all cost spent by the LLC.

Stephen Fishman, from Collective.com, wrote, "The costs that you pay after your LLC is formed are also tax-deductible. You can deduct California’s $800 annual tax, along with any annual fee you pay, from your federal taxes. You can also deduct maintenance costs for your LLC, including business license fees and registered agent fees. " [read more]

This makes a majority of one's operation well worth the labor. The only trifle left for these business owners are the funds for starting their company. For those that used their unemployment during 2020 have no problem making the leap, all thanks to the stimulus checks added into their checks. But for the rest, we shall see. The surprises of the current state of the world has proven that business is still possible. Some are re-employed, while many have moved on to better opportunities.

Whatever the future may bring, at least there is momentum available for a fresh start.

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