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STATE OF CALIFORNIAFRANCHISE TAX BOARD

California Forms & Instructions

568

2009Limited Liability Company Tax Booklet

Members o the Franchise Tax Board

John Chiang, ChairBetty T. Yee, Member

Michael C. Genest, Member

This booklet contains:Form 568, Limited Liability Company Returno IncomeFTB 3537 (LLC), Payment or AutomaticExtension or LLCsFTB 3522, LLC Tax VoucherFTB 3536 (LLC), Estimated Fee or LLCsFTB 3832, Limited Liability CompanyNonresident Members ConsentFTB 3885L, Depreciation and AmortizationSchedule D (568), Capital Gain or LossSchedule K-1 (568), Members Share oIncome, Deductions, Credits, etc.

File 568 K-1s via CD or Diskette.Put up to 300,000+ K-1s on CD or

12,000 K-1s on a diskette.

For more in ormation regarding business e-fle,see page 2 or go to tb.ca.gov and search orbusiness e fle .

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Page Form 568 Booklet 2009

Table o Contents

General In ormation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Instructions or LLC Income Worksheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Instructions or Form 568 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Instructions or Schedule K (568) and Schedule K-1 (568) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Federal/State Line Re erences Chart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23Limited Liability Company Income Worksheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Form 568 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Schedule K-1 (568) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Schedule D (568) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Instructions or Schedule D(568) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

FTB 3885L . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Instructions or FTB 3885L . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Members Instructions or Schedule K-1 (568) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

FTB 3832 and Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

FTB 3537 (LLC) and Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

FTB 3522 and Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

FTB 3536 (LLC) and Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

Codes or Principal Business Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

How to Get Cali ornia Tax In ormation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

Business e-fleBusiness e-fle is available or the ollowing returns: Form 568, Limited Liability Company Return o Income Form 565, Partnership Return o Income Form 100, Cali ornia Corporation Franchise or Income Tax Return, including

combined reports Form 100W, Cali ornia Corporation Franchise or Income Tax Return

Waters-Edge Filers, including combined reports Form 100S, Cali ornia S Corporation Franchise or Income Tax ReturnFor more in ormation, go to tb.ca.gov and search or business e fle .

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Form 568 Booklet 2009 (REV 08-10)Page

In general, Cali ornia law con orms to the Internal Revenue Code (IRC) as oJanuary 2005. However, there are continuing di erences between Cali orniaand ederal law. When Cali ornia con orms to ederal ta law changes,we do not always adopt all o the changes made at the ederal level. Formore in ormation, go to tb.ca.gov and search orcon ormity. Additionalin ormation can be ound in FTB Pub. 1001, Supplemental Guidelines toCali ornia Adjustments, the instructions or Cali ornia Schedule CA (540 or540NR), and the Business Entity ta booklets.The instructions provided with Cali ornia ta orms are a summary oCali ornia ta law and are only intended to aid ta payers in preparing theirstate income ta returns. We include in ormation that is most use ul to thegreatest number o ta payers in the limited space available. It is not possibleto include all requirements o the Cali ornia Revenue and Ta ation Code(R&TC) in the ta booklets. Ta payers should not consider the ta booklets asauthoritative law.

Whats NewCharitable Contributions or 010 Haiti Disaster Cali ornia law con orms tothe ederal law which allows a 2009 charitable contribution deduction or cashcontributions made a ter January 11, 2010, and be ore March 1, 2010, or therelie o victims in areas a ected by the earthquake in Haiti on January 12,2010. Limited Liability Companies (LLCs) may claim the deduction on the2009 or 2010 Cali ornia ta return. LLCs may choose to claim the deductionin di erent ta able years or ederal and Cali ornia purposes.New Jobs Credit For ta able years beginning on or a ter January 1, 2009,a new jobs credit in the amount o $3000 is allowed or a quali ed employeror each increase in quali ed ull-time employee hired in the current ta ableyear that increases the employers number o ull-time employees over theprevious year.For more in ormation, go totb.ca.govand search ornew jobs or get ormFTB 3527, New Jobs Credit.Farmworker Housing Credit For ta able years beginning on or a terJanuary 1, 2009, the armworker housing credit has been consolidated intothe low-income housing ta credit. For more in ormation, get orm FTB 3521.Backup Withholding Beginning on or a ter January 1, 2010, with certainlimited e ceptions, payers that are required to withhold and remit backupwithholding to the Internal Revenue Service (IRS) are also required towithhold and remit to the Franchise Ta Board (FTB). The Cali ornia backupwithholding rate is 7% o the payment. For Cali ornia purposes, dividends,interests, and any nancial institutions release o loan unds made in thenormal course o business are e empt rom backup withholding.I the LLC (payee) has backup withholding, the LLC (payee) must contactthe FTB to provide a valid Ta payer Identi cation Number, which is either theSecretary o State (SOS) le number or the ederal employer identi cationnumber (FEIN), be ore ling the ta return. Failure to provide the SOS numberor FEIN may result in a denial o the backup withholding credit. For morein ormation, go to tb.ca.govand search orbackup withholding.Cali ornia Film and Television Tax Credit For ta able years beginning on ora ter January 1, 2011, a lm and television credit against ta will be allowed.The credit, which is allocated and certi ed by the Cali ornia Film Commission,is 20% o e penditures attributable to a quali ed motion picture and 25% oproduction e penditures attributable to an independent lm or a TV seriesthat relocates to Cali ornia. The Cali ornia Film Commission will acceptapplications on a rst come, rst served basis beginning on July 1, 2009. Formore in ormation go toflm.ca.gov and search orincentives.Natural Heritage Preservation Credit The unding or the Natural HeritagePreservation Credit is available beginning January 1, 2010, until June 30,2015. Currently there is no unding available to award or claim credits or theperiod rom July 1, 2008, to December 31, 2009. However, carryover is nota ected or previously awarded credits.De erred Income Cali ornia has not con ormed to the ederal electionunder IRC Section 108(i) to de er the income rom discharge o indebtednessin connection with the reacquisition a ter December 31, 2008, and be oreJanuary 1, 2011, o a debt instrument issued by a C corporation or by anyperson in connection with the conduct o a trade or business.Partnership Converting to a Corporation IRS Revenue Ruling 2009-15 wasreleased which e plains that in certain situations, a partnership that convertsto a corporation under Section 301.7701-3(c)(1)(i) or under a state law

ormless conversion statute is eligible to make an S election e ective or thecorporations rst ta able year.

2009 Instructions for Form 568, Limited Liability Company Return of IncomRe erences in these instructions are to the Internal Revenue Code (IRC) as o January 1, 2005, and to the Cali ornia Revenue and Taxation Code (R&TC).

Suspension/For eiture Beginning January 1, 2009, LLCs will be suspendor or eited or ailure to le or ailure to pay. See General In ormationSuspension/For eiture, or more in ormation.Increase in Rates For ta able years beginning on or a ter January 1, 200the ma imum personal income ta rate increased to 9.55%. In addition,non-Cali ornia Partnerships are subject to withholding requirements on thsale o Cali ornia real property at a rate o 3 1/3% o sales price or 9.55gain. The alternative withholding rates or the sale o Cali ornia real proS corporations increased to 11.05% and 13.05% or Financial S corporatiGroup Nonresident Returns (also known as Composite Returns) Forta able years beginning on or a ter 01/01/2009: Group nonresident returns may include less than two nonresident

individuals. Nonresident individuals with more than $1,000,000 o Cali ornia ta a

income are eligible to be included in group nonresident returns. An additional one percent ta will be assessed on nonresident individu

who would have Cali ornia ta able income over $1,000,000.See FTB Pub. 1067, Guidelines or Filing a Group Form 540NR, or morin ormation.Con ormity For updates regarding the ollowing ederal acts, go to

tb.ca.gov and search orcon ormity. American Recovery and Reinvestment Act o 2009

General In ormation

A Important In ormationIncome Exclusion o Federal Energy GrantsFederal energy grants provided in lieu o ederal energy credits are e clu

rom Cali ornia gross income and alternative minimum ta able income oindividuals and businesses. The income e clusion is applicable or any tayear and is thus retroactive in its application.Estimated Fee or LLCsFor ta able years beginning on or a ter January 1, 2009, the LLC mustestimate the ee it will owe or the year and make an estimated ee paymby the 15th day o the 6th month o the current ta able year. LLCs will us

orm FTB 3536, Estimated Fee or LLCs, to remit the estimated ee. A pwill apply i the LLCs estimated ee payment is less than the ee owed year. The penalty is equal to 10% o the amount o the LLC ee owed oyear over the amount o the timely estimated ee payment. A penalty willbe imposed i the estimated ee paid by the due date is equal to or greaterthan the total amount o the ee o the LLC or the preceding ta able yeaThe LLC ee remains due and payable by the due date without e tension oLLCs return. LLCs will use orm FTB 3536 to pay by the due date o thereturn, any amount o LLC ee owed that was not paid as a timely estima

ee payment. I the ta able year o the LLC ends prior to the 15th day o6th month o the ta able year, no estimated ee payment is due, and theLLC ee is due on the due date o the LLCs return. See General In ormaLimited Liability Company Ta and Fee, or more in ormation.Filing Requirements or Disregarded EntitiesThe ling requirements or disregarded entities have been revised. SeeGeneral In ormation, Check-the-Bo Regulations, or more in ormationInstallment SalesFor installment sales occuring on or a ter January 1, 2009, buyers arerequired to withhold on each installment sale payment i the sale o Calireal property is structured as an installment sale.Business Tax Credit LimitationFor taxable years beginning on or a ter January 1, 2008, and be ore Janu2010, business tax credits can only o set 50% o the net tax, i the corptaxable income is $500,000 or more. Corporations with taxable income lesthan $500,000 are not subject to the credit limitation. For the purpose o tlimitation, taxable income means net income or state purposes.Business ta credits disallowed due to the 50% limitation may be carriedover. The carryover period or disallowed credits is e tended by the numbo ta able years the credits were not allowed. For more in ormation see tapplicable Schedule P, (Form 100, 100W, 540, 540NR, 541), AlternativeMinimum Ta and Credit Limitations.Third-Party DesigneeFor ta able years beginning on or a ter January 1, 2008, a partnership candesignate a third party to discuss the ta return with the Franchise Ta Boa(FTB). For more in ormation see General In ormation, Signatures.

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Page Form 568 Booklet 2009 (REV 08-10)

Limited Partnership Act o 008For taxable years beginning on or a ter January 1, 2008, domestic limitedpartnerships whose certifcates o limited partnership have been canceled mayrevive by fling a certifcate o revival with the Cali ornia Secretary o State(SOS). The certifcate must include written confrmation by the FTB that alltaxes, interest, and penalties have been paid or all tax years through the dateo revival. This includes the tax years a ter the limited partnership canceled.e-flingBeginning January 2007, the FTB o ers e- ling or limited liability companies

ling a Form 568, Limited Liability Company Return o Income, and certainaccompanying orms and schedules. Check with the LLCs so tware providerto see i the limited liability company can e- le.Revised Schedule K and Schedule K-1The Cali ornia Schedule K (568) and Schedule K-1 (568) line items wererevised to be in a similar ormat with the ederal Schedule K (1065) and K-1(1065). Re er to the Schedule K Federal/State Line Re erences chart, in thisbooklet, and Speci c Line Instructions when completing Cali ornia Schedule K(568) and Schedule K-1 (568).LLC FeeThe LLC ee is based on total Cali ornia source income rather than onworldwide total income. For more in ormation, see the LLC IncomeWorksheet Instructions included in this booklet.Series LLCA series LLC is a single LLC that has separate allocations o assets eachwithin its own series. When ling orm FTB 3522, LLC Ta Voucher, writeSeries LLC # ___ a ter the name or each series. In addition, write SeriesLLC in red on the top right margin o the voucher. Only the rst series to payta or le a return may use a Cali ornia SOS le number. On all other series,enter zeros or the entity identi cation number on the rst voucher and wewill assign a number and noti y each series. Get FTB Pub. 3556, LimitedLiability Company Filing In ormation, or more in ormation.Registered Domestic Partners (RDP)RDPs under Cali ornia law must le their Cali ornia income ta return usingeither the married/RDP ling jointly or married/RDP ling separately lingstatus. RDPs have the same legal bene ts, protections, and responsibilities asmarried couples unless otherwise speci ed.I you entered into a same se legal union in another state, other than amarriage, and that union has been determined to be substantially equivalentto a Cali ornia registered domestic partnership, you are required to le aCali ornia income ta return using either the married/RDP ling jointly ormarried/RDP ling separately ling status. For more in ormation on whatstates have legal unions that are considered substantially equivalent, go to

tb.ca.gov and search orattorney general .

For purposes o Cali ornia income ta , re erences to a spouse, husband,or wi e also re er to a Cali ornia registered domestic partner (RDP), unlessotherwise speci ed. When we use the initials RDP they re er to both aCali ornia registered domestic partner and a Cali ornia registered domesticpartnership, as applicable. For more in ormation on RDPs, get FTBPub. 737, Ta In ormation or Registered Domestic Partners.Round Cents to Dollars Round cents to the nearest whole dollar. Fore ample, round $50.50 up to $51 or round $25.49 down to $25. I you do notround, the FTB will disregard the cents.Reconciliation o IncomeFor ta able years beginning on or a ter January 1, 2006, the Internal RevenueService (IRS) requires certain LLCs to complete Schedule M-3 (Form 1065),Net Income (Loss) Reconciliation or Certain Partnerships, instead oSchedule M-1, Reconciliation o Income (Loss) per Books With Income(Loss) per Return. For Cali ornia purposes, the LLC must complete theCali ornia Schedule M-1, and attach either o the ollowing:

A copy o the Schedule M-3 (Form 1065) and related attachments to theLimited Liability Company Return o Income. A complete copy o the ederal return.The FTB will accept the Schedule M-3 (Form 1065) in a spreadsheet ormat imore convenient.Business Entity Name and Identifcation NumberIn order to e pedite processing, be sure to use the business entity name as itappears with the Cali ornia SOS and a valid Cali ornia identi cation number.Cali ornia Use TaxI the LLC made purchases rom out-o -state sellers and owes Cali ornia useta , the LLC may report and pay the ta on its Limited Liability CompanyReturn o Income. See Additional In ormation, Cali ornia Use Ta , or morein ormation.

Cali ornia Tax In ormation on the InternetYou can download, view, and print Cali ornia ta orms and publications

tb.ca.gov.Federal Tax In ormation on the InternetThe IRS has ederal orms and publications available to download, view,print at irs.gov.State Agencies WebsitesAccess other state agencies websites through the State Agencies Directoryon Cali ornias website atca.gov .Joint Agency WebsiteFor additional business ta in ormation, go to the Cali ornia Ta ServiCenter attaxes.ca.gov , sponsored by the Board o Equalization (BOE),Employment Development Department (EDD), the FTB, and the IRS.Providing Cali ornia and Federal ReturnsThe FTB may request a copies o Cali ornia or ederal returns that are suto or related to a ederal e amination. Generally, the Cali ornia statute olimitations is our years rom the due date o the return or rom the date whichever is later. However, the statute is e tended in situations in whichan individual or a business entity is under e amination by the IRS. For moin ormation concerning the e tended statute o limitations, due to a edee amination, see General In ormation, Amended Return.The FTB recommends keeping copies o returns and records that veri yincome, deductions, adjustments, or credits reported, or at least theminimum time required under the statute o limitations. However, somerecords should be kept much longer. For e ample, members should keeprecords substantiating their basis in an LLC and LLCs should keep records

gure the basis o its assets.Substitute Schedule K-1 (568)The FTB recommends lingpaperless substitute Schedules K-1 (568).Since so tware is most o ten used to prepare Form 568 and Schedules K-(568), you may already have the in ormation needed to prepare paperlessSchedules K-1 (568). Once the in ormation is in a database or spreadsheeits easy to trans er to the required record layout and then save it to a CD odiskette.Get approval rom the FTB to use substitute Schedules K-1 (568), i any

ollowing apply: The LLC wants to use paperless Schedules K-1 (568). The LLC does not use the o cial Cali ornia Schedule K-1 (568) prep

by the FTB. The LLC does not use a so tware program with an FTB-approved

Schedule K-1 (568).The FTBdoes not accept the ederal Schedules K-1 (1065) as a substitute

schedule.For more in ormation, see General In ormation, Substitute Schedules.Federal/State Di erencesFor LLCs classi ed as partnerships, Cali ornia ta law generally con orm

ederal ta law in the area o partnerships (IRC, Subchapter K PartnerPartnerships). However, there are some di erences: Cali ornia does not con orm to the additional rst-year depreciation o

certain quali ed property placed in service a ter 10/03/2008, and theelection to claim additional research and minimum ta credits in lieu oclaiming the bonus depreciation.

Cali ornia does not con orm to the energy e cient commercial builddeduction.

Cali ornia does not con orm to reduce the compensation deductionor certain employers rom $1 million to $500,000, and makes certain

parachute payments nondeductible. Cali ornia does not con orm to e tend o suspension o income

limitations on percentage depletion or production rom marginal wellThe percentage depletion deduction, which may not e ceed 65% o thta payers ta able income, is restricted to 100% o the net income der

rom the oil or gas well property. An $800 annual ta is generally imposed on limited partnerships (LPs)

LLCs, limited liability partnerships (LLPs), and real estate mortgageinvestment conduits (REMICs) that are partnerships or classi ed aspartnerships or ta purposes.

Distributions to certain nonresident partners are subject to withholding Cali ornia ta .

Deductions or ta es paid to other states are not allowed. Cali ornia ollows ederal law by requiring partnerships to use a requ

ta able year. However, Cali ornia does not con orm to the ederal reqpayment provision.

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Cali ornia law has speci c provisions concerning the distributive shareo partnership ta able income allocable to Cali ornia, with specialapportionment ormulas or pro essional partnerships.

Cali ornia law modi es the ederal de nitions or unrealized receivablesand substantially appreciated inventory items.

Cali ornia does not con orm to the electing large partnership provisions. Partnerships can electronically le their Cali ornia partnership returns.

Also, partnerships can le Schedules K-1 (568) via CD or diskette (SeeGeneral In ormation, Substitute Schedules, or more in ormation).

Cali ornia has not con ormed to the provisions relating to the Ta Equityand Fiscal Responsibility Act (TEFRA).

Cali ornia has not adopted the ederal de nition o small partnerships, asde ned in IRC Section 6231.

This list is not intended to be all-inclusive o the ederal and state di erences.For more in ormation, consult Cali ornias R&TC.Conversion to a Limited Liability Company (LLC)A partnership (or other business entity) that converts to an LLC during theyear must le two Cali ornia returns. Even i the partners/members and thebusiness operations remain the same, the partnership should le Form 565,Partnership Return o Income, (or the appropriate orm) or the beginningo the year to the date o change. For the remainder o the year, the newlyconverted LLC must le Form 568. See General In ormation, AccountingPeriods, or urther instructions.Tax ShelterI the LLC was involved in a reportable transaction, including a listedtransaction, the LLC may have a disclosure requirement. Attach the ederalForm 8886, Reportable Transaction Disclosure Statement, to the back o the

Cali ornia return along with any other supporting schedules. I this is the rsttime the reportable transaction is disclosed on the return, send a duplicatecopy o the ederal Form 8886 to the address below. The FTB may imposepenalties i the LLC ails to le ederal Form 8886, ederal Form 8918, MaterialAdvisor Disclosure Statement, or any other required in ormation. A materialadvisor is required to provide a reportable transaction number to all ta payersand material advisors or whom the material advisor acts as a materialadvisor.

ATSU 398 F385FRANCHISE TAx BOARDPO BOx 1673SACRAMENTO CA 95812-1673

For more in ormation, go toftb.ca.gov and search ortax shelter .Claim o RightI the LLC had to repay an amount that was included in income in an earlieryear, under a claim o right, the LLC may be able to deduct the amount repaid

rom its income or the year in which it was repaid. Or, i the amount the LLCrepaid is more than $3,000, the LLC may be able to take a credit against its taxor the year in which it was repaid. For more in ormation, see the Repayment

section o ederal Publication 525, Taxable and Nontaxable Income.

B IntroductionLLCs combine traditional corporate and partnership characteristics. LLCmembers are a orded all o the ollowing: Limited liability with the e tent o a members liability limited to the

members equity investment. Fle ible management alternatives. Liberal membership quali cation requirements.LLCs classi ed as partnerships or ta purposes generally will determinetheir Cali ornia income, deductions, and credits under the Personal IncomeTa Law. They will be subject to an annual ta as well as the LLC ee basedon total Cali ornia income. See General In ormation, Limited Liability

Company Ta and Fee, and the LLC Income Worksheet Instructions, or morein ormation.LLCs organized in Cali ornia are vested with all the rights and powers enjoyedby a natural person in carrying out business a airs. However, Cali ornia lawdoes not allow the ormation or registration o LLCs ( oreign or domestic)in Cali ornia to render any type o pro essional service or which a license,certi cation, or registration is required under the Business and Pro essionsCode or the Chiropractic Act, with the e ception o insurance agents andinsurance brokers.Cali ornia law requires LLCs not organized in the state o Cali ornia toregister with the Cali ornia SOS be ore entering into any intrastate businessin Cali ornia. The laws o the state or oreign country in which the LLC isorganized generally govern the internal a airs o the LLC. The Cali ornia SOSmay not deny recognition o an LLC because the laws o the organizations

home state or oreign country di er rom Cali ornias laws, e cept in tho pro essional service LLCs, which are not allowed to register as LLCs Cali ornia.For more in ormation about organizing and registering an LLC, contact:

BUSINESS ENTITIES SECTIONCALIFORNIA SECRETARY OF STATEPO BOx 944228SACRAMENTO CA 94244-2280Telephone: 916.657.5448

or contact the Cali ornia SOS atsos.ca.gov .

C PurposeUse Form 568: To determine the amount o the LLC ee (including a disregarded enti

ee) based on total Cali ornia income. To report the LLC ee. To report the annual ta . To report and pay any nonconsenting nonresident members ta . To report income, deductions, gains, losses, etc., rom the operation o

a multiple member LLC that has elected to be classi ed as a partnershiForm 568 is the return or calendar year 2009 or any scal year beginnin 2009.

D Who Must FileAn LLC may be classi ed or ta purposes as a partnership, a corporationa disregarded entity. The LLC should le the appropriate Cali ornia returnForm 568 must be led by every LLC that is not ta able as a corporation iany o the ollowing apply: The LLC is doing business in Cali ornia. The LLC is organized in Cali ornia. The LLC is organized in another state or oreign country, but registere

with the Cali ornia SOS. The LLC has income rom Cali ornia sources.RegistrationLLCs that are ormed in Cali ornia, are required to le articles o incorpwith the Cali ornia SOS be ore doing business in this state.LLCs organized under the laws o another state or oreign country arerequired to register with the Cali ornia SOS be ore entering into intrastatebusiness in Cali ornia.Nonregistered oreign LLCs that are members o an LLC doing businessin Cali ornia or general partners in a limited partnership doing business inCali ornia are considered doing business in Cali ornia.

Regardless o where the trade or business o the LLC is primarily conducan LLC is considered to be doing business in Cali ornia i any o its memmanagers, or other agents are conducting business in Cali ornia on behalthe LLC. For more in ormation get FTB Pub. 1063, Cali ornia CorporatioLaw A Guide or Corporations.Exceptions to fling Form 568: The LLC elected to be ta ed as a corporation or ederal ta purposes The LLC is a single member limited liability company (SMLLC) that w

treated as an association ta able as a corporation prior to January 1,1997, or Cali ornia ta purposes, and did not elect to change that tatreatment in the current ta able year.

Nonregistered oreign LLCs (e cluding disregarded entities/singlemember LLCs) that are not doing business, but are deriving income rCali ornia or ling to report an election on behal o a Cali ornia res

le Form 565. LLCs classi ed as a general corporation le Form 100, Cali ornia

Corporation Franchise or Income Ta Return. LLCs classi ed as anS corporation le Form 100S, Cali ornia S Corporation Franchise orIncome Ta Return. For LLCs classi ed as disregarded entities, seeGeneral In ormation, Check-the-Bo Regulations.

The LLC is still required to le Form 568 i the LLC is registered in Caliand both o the ollowing apply: The LLC is not doing business in Cali ornia. The LLC does not have Cali ornia source income.The LLCs ling requirement will be satis ed by doing all o the ollowi1. Completing Form 568 with all supplemental schedules.2. Completing and attaching Cali ornia Schedules K-1 (568) or membe

with Cali ornia addresses.

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Page 6 Form 568 Booklet 2009 (REV 08-10)

3. Writing SB 1106 Filing in red at the top o Form 568, Side 1.4. Entering the total number o members in Question J on Side 2 o the

Form 568.An LLC that is an electing large partnership or ederal purposes and uses the

ederal Form 1065-B, U.S. Return o Income or Electing Large Partnerships,must still use Form 568. Cali ornia law does not con orm to the ederalelecting large partnership provisions.Certain publicly traded partnerships treated as corporations under IRCSection 7704 must le Form 100.A resident member o an out-o -state LLC ta ed as a partnership not requiredto le Form 568, may be required to urnish a copy o ederal Form 1065, U.S.Return o Partnership Income, to substantiate the members share o LLCincome or loss.

E When and Where to FileAn LLC must le Form 568, pay any nonconsenting members ta , and payany amount o the LLC ee owed that was not paid as an estimated ee with

orm FTB 3536, by the 15th day o the 4th month ( scal year) or April 15,2010 (calendar year), ollowing the close o its ta able year.PAYMENTS Mail Form 568 withpayment to:

FRANCHISE TAx BOARDPO BOx 942857SACRAMENTO CA 94257-0601

E-Filed returns: Mail orm FTB 3588, Payment Voucher or LLC e- ledReturns, withpayment to:


Using blue or black ink, make the check or money order payable to theFranchise Ta Board. Write the LLCs, SOS le number, ederal employeridenti cation number (FEIN), and 2009 Form 568 on the check or moneyorder.The SOS le number is 12 digits long and must begin with 19 or 20.Make all checks or money orders payable in U.S. dollars and drawn against aU.S. nancial institution.Do notattach a copy o the return with the balance due payment i the LLCalready led a return or the same ta able year.REFUNDS Mail Form 568 requesting are undto:


RETURN WITHOUT PAYMENT or PAID BY EFT Mail Form 568without a payment or paid by EFTto:


ExtensionsCali ornia does not require the ling o written applications or e tensions. Ithe LLC cannot le its Form 568 by the returns due date, the LLC is grantedan automatic si month e tension.However, the automatic e tension does not e tend the time to pay the LLC eeor nonconsenting nonresident members ta .I the LLC is ling the return under e tension, see orm FTB 3537, Payment

or Automatic E tension or LLCs, included in this booklet, to submit therequired payments.PenaltyTo avoid late payment penalties or use ta , the limited liability company mustreport and pay the use ta with atimely led ranchise or income ta return.Annual Limited Liability Company TaxI the 2009 annual ta o $800 was not paid on or be ore the 15th day o the4th month a ter the beginning o the ta able year ( scal year) or April 15,2009 (calendar year), the ta should be sent using the 2009 orm FTB 3522,LLC Ta Voucher. (Do not use the 2010 orm FTB 3522 included in thisbooklet).Also see General In ormation, Penalties and Interest, or the additionalamount that is now due. To assure proper application o the ta payment tothe LLC account,do not send the $800 annual ta with Form 568.

The 2010 $800 annual ta is due on or be ore the 15th day o the 4th mona ter thebeginning o the 2010 ta able year ( scal year) or April 15, 2010(calendar year). The payment is sent with orm FTB 3522.Do not mail the$800 annual tax with Form 568. When the due date alls on a weekend orholiday, the deadline to le and pay without penalty is e tended to the nebusiness day.Private Delivery ServicesCali ornia law con orms to ederal law regarding the use o certain desiprivate delivery services to meet the timely mailing as timely ling/payinrule or ta returns and payments. See the instructions or ederal Form 1

or a list o designated delivery services. I a private delivery service is u

address the return to:FRANCHISE TAx BOARDSACRAMENTO CA 95827

Caution: Private delivery services cannot deliver items to PO bo es. Iusing one o these services to mail any item to the FTB,DO NOTuse anFTB PO Bo .

F Limited Liability Company Tax and FeeThe de nition o limited liability company has been revised to e clude cetitle holding companies that are ta e empt provided that they are treated partnerships or disregarded entities or ta purposes. As such they are notliable or the Annual LLC ta and ees.Enter all payment types (overpayment rom prior year, annual ta , ee, etmade or the 2009 ta able year on the applicable line o Form 568.Annual Limited Liability Company TaxLLCs are subject to an $800 annual ta i they are doing business in Calior have articles o organization accepted, or a certi cate o registration isby the Cali ornia SOS. The annual ta is prepaid or the privilege o doibusiness in Cali ornia, and is due and payable on or be ore the 15th day othe 4th month a ter thebeginning o the ta able year. The annual ta must paid or each ta able year until the appropriate papers are led. See GeneIn ormation, Cancelling a Limited Liability Company, or more in ormaUse orm FTB 3522 to submit the $800 annual ta payment. Make the chor money order payable to the Franchise Ta Board. Write the LLCs SOnumber, FEIN, and 2010 FTB 3522 on the check or money order.I the 15th day o the 4th month o an e isting oreign LLCs ta able yepassed be ore the e isting oreign LLC commences business in Cali ornregisters with the Cali ornia SOS, the annual ta should be paid immediata ter commencing business or registering with the Cali ornia SOS.Limited Liability Company FeeIn addition to the annual ta , every LLC must pay a ee i the total Cali

annual income is equal to or greater than $250,000. For more in ormationthe LLC Income Worksheet instructions included in this booklet.For the 2008 ta able year and prior, the LLC ee is due on or be ore the 1day o the 4th month a ter the close o the LLCs ta able year.For ta able years beginning on or a ter January 1, 2009, the LLC mustestimate the ee it will owe or the year and make an estimated ee paymby the 15th day o the 6th month o the current ta able year. LLCs should

orm FTB 3536, Estimated Fee or LLCs, to remit the estimated ee. A pwill apply i the LLCs estimated ee payment is less than the ee owed year. The penalty is equal to 10% o the amount o the LLC ee owed oyear over the amount o the timely estimated ee payment. A penalty willbe imposed i the estimated ee paid by the due date is equal to or greaterthan the total amount o the ee o the LLC or the preceding ta able yeaThe LLC ee remains due and payable by the due date without e tension oLLCs return. LLCs will use orm FTB 3536 to pay by the due date o thereturn, any amount o LLC ee owed that was not paid as a timely estima

ee payment. I the ta able year o the LLC ends prior to the 15th day o6th month o the ta able year, no estimated ee payment is due, and the Lee is due on the due date o the LLCs return. For ta able years beginnin

or a ter January 1, 2006, use the ollowing chart to compute the ee:I total Cali ornia annual income rom

Form 568, Side 1, line 1 is: The ee is:Equal to or over but not over $ 250,000 $ 499,999 $ 900

500,000 999,999 2,5001,000,000 4,999,999 6,0005,000,000 and over 11,790

I you have a total Cali ornia annual income o $250,000 or greater, you report a ee.To determine the LLC ee see the Speci c Line Instructions or line 1.

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I the FTB determines multiple LLCs were ormed or the primary purpose oreducing ees, the LLCs total income rom all sources that are reportable toCali ornia could include the aggregate total income o all commonly controlledLLC members. Commonly controlled means control o more than 50% othe capital interests or pro t interests o the ta payer and any other LLC orpartnership by the same persons.Series LLCsI the laws o the state where the LLC is ormed provide or the designation oseries o interests ( or e ample, a Delaware Series LLC) and: (1) the holderso the interests in each series are limited to the assets o that series uponredemption, liquidation, or termination, and may share in the income onlyo that series, and (2) under home state law, the payment o the e penses,charges, and liabilities o each series is limited to the assets o that series,then each series in a series LLC is considered a separate LLC and must leits own Form 568 and pay its own separate LLC annual ta and ee, i it isregistered or doing business in Cali ornia.Nonconsenting Nonresident Members TaxEvery nonresident member must sign a orm FTB 3832, Limited LiabilityCompany Nonresident Members Consent. The LLC returns the signed ormwith Form 568. I a nonresident member ails to sign orm FTB 3832, theLLC is required to pay ta on that members distributive share o income atthe highest marginal rate. Any amount paid by the LLC will be considered apayment made by the nonresident member.The ta may be reduced by the amount o ta previously withheld and paid bythe limited liability company with respect to each nonconsenting, nonresidentmember.Reminder: All nonresident members must le a Cali ornia ta return. Thecompletion o orm FTB 3832 does not satis y the nonresident membersCali ornia ling requirement. Corporate members are also considered doingbusiness in Cali ornia and may have additional ling requirements. For morein ormation, get FTB Pub. 1060, Guide or Corporations Starting Business inCali ornia. Nonresident individuals may quali y to le a group Form 540NR,Cali ornia Nonresident or Part-Year Resident Income Ta Return, and shouldget FTB Pub. 1067, Guidelines or Filing a Group Form 540NR.I the LLCs return is being led on or be ore the 15th day o the 4th month( scal year) or April 15, 2010 (calendar year), the LLC completes theSchedule T, Nonconsenting Nonresident Members Ta Liability. See Speci cLine Instructions or Schedule T in this booklet or more in ormation.I the LLC owes NCNR ta and is unable to complete Form 568 on or be orethe original due date, it must complete orm FTB 3537. The nonconsentingnonresident members ta along with the voucher must be recieved by: Fiscal year: On or be ore the 15th day o the ourth month ollowing the

close o the ta able year

Calendar year: April 15, 2010. Failure to do so causes penalties andinterest to be assessed. See the instructions or orm FTB 3537 includedin this booklet.

G Penalties and InterestFailure to Comply with Filing RequirementsUnless ailure is due to a reasonable cause, a penalty will be assessed i theLLC is required to le a Form 568 and either o the ollowing apply: The LLC ails to le the return on time, including e tensions. The LLC les a return, including Schedules K-1 (568), that ails to show all

the in ormation required.The amount o the penalty or each month, or part o a month ( or ama imum o ve months), that the ailure continues, is $10 multiplied by thetotal number o members in the LLC during any part o the ta able year orwhich the return is due. Interest will be charged on the penalty rom the datethe notice o ta due is mailed until the date the return is led.

For small partnerships, as de ned in IRC Section 6231, the ederale ception to the imposition o penalties or ailure to le partnership returnsdoes not apply or Cali ornia purposes. For more in ormation see R&TCSection 19172.Failure to File a Timely ReturnAny LLC that ails to le Form 568 on or be ore the e tended due date isassessed a penalty. The penalty is 5% o the unpaid ta (which includes theLLC ee and nonconsenting nonresident members ta ) or each month, orpart o the month, the return remains un led rom the due date o the returnuntil led. The penalty may not e ceed 25% o the unpaid ta . I an LLC doesnot le its return by the e tended due date, the automatic e tension will notapply and the late ling penalty will be assessed rom the original due date othe return. See R&TC Section 19131 or more in ormation.

Failure to Pay by the Due DateThe ailure-to-pay penalty is imposed rom the due date o the return or tdue date o the payment. Since any amount o the LLC ee due which wanot paid as an estimated ee payment, and the nonconsenting nonresidentmembers ta are due with the return, the penalty is calculated rom the15th day o the 4th month a ter the close o the ta able year. The annual payment date is the 15th day o the 4th month during the ta able year, so tpenalty is calculated rom this date. The penalty or each item is calculateseparately.The ailure-to-pay penalty begins at 5%. Every month or raction thereothe amount is not paid the penalty increases .5%. The penalty continuesto increase or 40 months, thereby ma imizing at 25%. See R&TCSection 19132 or more in ormation.I an LLC is subject to both the penalty or ailure to fle a timely return the penalty or ailure to pay the total tax by the due date, a combinationthe two penalties may be assessed, but the total penalty may not exceed 2o the unpaid tax. However, the penalty or ailure to comply with the flrequirements will be assessed in addition to the penalty or ailure to fle timely return and the penalty or ailure to pay the total tax by the due dlate payment penalty may be waived where 90% o the tax shown on theis paid by the original due date o the return, but not less than the annual I the LLC underpays the estimated ee, a penalty o 10% will be added

ee. The underpayment amount will be equal to the di erence between amount o the ee due or the taxable year less the amount paid by the dA penalty will not be imposed i the estimated ee paid by the due date ito or greater than the total amount o the LLC or the preceding taxable InterestInterest is due and payable on any ta due i not paid by the original due dInterest is also due on some penalties. The automatic e tension o time to

le does not stop interest rom accruing. Cali ornia ollows ederal rulesthe calculation o interest. Get FTB Pub. 1138, Business Entity Re und/BIn ormation, or more in ormation.Other Penalties/FeesA penalty may also be charged i a payment is returned or insu cient In addition, ees may be charged or the cost o collection.

H Accounting MethodsCompute ordinary income or loss by the accounting method regularly usedto maintain the LLCs books and records. This method must clearly refect LLCs income or loss.LLCs given permission to change their accounting method or ederalpurposes should see IRC Section 481 or in ormation relating to theadjustments required by changes in accounting method.

Generally, an LLC may not use the cash method o accounting i the LLCa corporate member, averages annual gross receipts o more than $5 millioor is a ta shelter. For e ceptions, see IRC Section 448.The mark-to-market accounting method is required or securities dealers.The IRC Section 481 adjustment is taken into account ratably over ve yebeginning with the rst income year.

I Accounting PeriodsLLC returns normally must be led or an accounting period that includes12 ull months. A short period return must be led i the LLC is created oterminated within the ta able year. In that case, write Short Period in redat the top o Form 568, Side 1.For in ormation on the required ta able year o a partnership that also apto LLCs, see the instructions or ederal Form 1065.

J Amended ReturnI , a ter the LLC les its return, it becomes aware o changes it must mathe LLC should le an amended Form 568 and an amended Schedule K-1(568) or each member, i applicable. Check the amended return bo inItem H(3) Form 568, Side 1. Give a corrected Schedule K-1 (568) withbo G(2) checked and label Amended to each a ected member. I the originally led a Form 540NR group nonresident member return, the LLCshould le an amended Form 540NR.I the LLC wishes to le amended Schedules K-1 (568) via CD or diskettGeneral In ormation, Substitute Schedules.I the LLCs ederal return is changed or any reason, the ederal changea ect the LLCs Cali ornia return. This would include changes made beco an e amination. The LLC must le an amended return within si montthe nal ederal determination i the LLC ee or ta a member owes has a ected. The LLC should attach a copy o the ederal Revenue Agents

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or other notice o the adjustments to the return. The LLC should in orm themembers that they may also be required to le amended returns within simonths rom the date o the nal ederal determination.

K Required In ormation ReturnsEvery LLC must le in ormation returns i , in the course o its trade orbusiness, any o the ollowing occur: The LLC makes payments to one person o rents, salaries, wages,

annuities, or other ed or determinable income during one calendar yeartotaling $600 or more.

The LLC pays an individual or one payee interest and dividends totaling

$10 or more during one calendar year. The LLC receives cash payments over $10,000.Payments o any amount by a broker, dealer, or barter e change agent mustalso be reported. Get FTB Pub. 4227A, Guide to In ormation Returns FiledWith Cali ornia, or more in ormation.LLCs must report payments made to Cali ornia residents by providing copieso ederal Form 1099 (series). For nonresidents, see the reporting andwithholding requirements on Form 592, Quarterly Resident and NonresidentWithholding Statement; Form 592-A, Foreign Partner or Member QuarterlyWithholding Remittance Statement; Form 592-B, Resident and NonresidentWithholding Ta Statement; and Form 592-F, Foreign Partner or MemberAnnual Return.LLCs must submit a copy o ederal Form 8300, Report o Cash PaymentsOver $10,000 Received in a Trade or Business, within 15 days a ter the dateo the transaction.LLCs must report interest paid on municipal bonds that are issued by a stateother than Cali ornia or a municipality other than a Cali ornia municipalitythat are held by Cali ornia ta payers. Entities paying interest to Cali orniata payers on these types o bonds are required to report interest paymentsaggregating $10 or more paid a ter January 1, 2009. In ormation returns willbe due June 1, 2010. For more in ormation, go totb.ca.govand search orFTB 800, Federally Ta E empt Non-Cali ornia Bond Interest and Interest-Dividend Payment In ormation.LLCs must use orm FTB 3834, Interest Computation Under the Look-BackMethod or Completed Long-Term Contracts, to report interest due or to bere unded under the look-back method on long-term contracts. I you are ling

orm FTB 3834 to compute the interest due or to be re unded under the Look-Back method, attach a copy o orm FTB 3834 to Form 568.Any in ormation returns required or ederal purposes under IRCSections 6038, 6038A, and 6038B are also required or Cali ornia purposes.Attach the in ormation returns to the Form 568 when led. I the in ormationreturns are not provided, penalties may be imposed under R&TC

Sections 19141.2 and 19141.5.All in ormation returns, unless otherwise noted, are mailed separately romthe Form 568. In ormation returns should be sent to:


L Special ItemsCali ornia LLC ta law generally ollows ederal partnership ta law or LLCsclassi ed as partnerships, in all o the ollowing areas: IRC Section 702(a) items Elections Distributions o unrealized receivables and inventory Members dealings with the LLC Contributions to the LLC Income o oreign nonresident members subject to withholding,

Form 592, Form 592-A, Form 592-B, and Form 592-F Basis and at-risk rules Passive activity limitations Net operating loss deduction by a member o the LLC (an LLC is not

allowed the deduction) Publicly traded partnerships Long-term contracts Installment sales Vacation pay Amortization o past service costs Distributions o contributed property by an LLC Recognition o precontribution gain in certain LLC distributions to

members

See the instructions or ederal Form 1065 or speci c in ormation abouthese areas.

M SignaturesForm 568 is not considered a valid return unless it is signed by an authorizmember or manager o the LLC. I a receiver, trustee in bankruptcy, orassignee controls the organizations property or business, that individualmust sign the return.Paid Preparers In ormationAnyone who is paid to prepare the LLC return must sign the return andcomplete the Paid Preparers Use Only area o the return.

All o the ollowing must be completed by the paid preparer: Complete the required preparer in ormation. Sign in the space provided or the preparers signature. Give the LLC a copy o the return in addition to the copy to be led w

the FTB.An individual who prepares the return and does not charge the LLC shouldnot sign the LLC return.Third Party DesigneeI the LLC wants to allow the FTB to discuss its 2009 return with the paidpreparer who signed it, check the Yes bo in the signature area o thereturn. This authorization applies only to the individual whose signatureappears in the Paid Preparers Use Only section o the return. It does noapply to the rm, i any, shown in that section.I the Yes bo is checked, the LLC is authorizing the FTB to call the papreparer to answer any questions that may arise during the processing o ireturn. The LLC is also authorizing the paid preparer to: Give the FTB any in ormation that is missing rom the return. Call the FTB or in ormation about the processing o the return or the

status o any related re und or payments. Respond to certain FTB notices about math errors, o sets, and return

preparation.The LLC is not authorizing the paid preparer to receive any re und check,bind the LLC to anything (including any additional ta liability), or otherwrepresent the LLC be ore the FTB.The authorization will automatically end no later than the due date (withouregard to e tensions) or ling the LLCs 2010 ta return. I the LLC wato e pand the paid preparers authorization, see orm FTB 3520, Powero Attorney Declaration or the Franchise Ta Board. I the LLC wants trevoke the authorization be ore it ends, noti y the FTB in writing or call800.852.5711.

N Group ReturnsNonresident Group ReturnsA corporation may le a group nonresident return on behal o electingnonresident individuals who receive wages, salaries, ees, or othercompensation rom that corporation or director services per ormed inCali ornia, including attendance o board o directors meetings in CaliNonresident members o an LLC doing business or deriving income romsources in Cali ornia may elect to le a group nonresident return (R&TCSection 18535).For ta able years beginning on or a ter 01/01/2009: Group nonresident returns may include less than two nonresident

individuals. Nonresident individuals with more than $1,000,000 o Cali ornia ta a

income are eligible to be included in group nonresident returns. An additional one percent ta will be assessed on nonresident individu

who would have Cali ornia ta able income over $1,000,000.

Get FTB Pub. 1067, Guidelines or Filing a Group Form 540NR, or morin ormation.

O Investment PartnershipsIncome o nonresident members, including banks and corporations,derived rom quali ying investment securities o an LLC that quali esan investment partnership is considered income rom sources other thanCali ornia, e cept as noted below. There ore, nonresident individuals or

oreign members generally will not be ta ed on this income. The LLC shoin orm its nonresident individuals or oreign members i all or a portion their distributive share o income is rom quali ying investment securito an investment partnership and whether it is sourced to Cali ornia. Sethe instructions or Question K, included in this booklet, or de nitions oinvestment partnership and quali ying investment securities.

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However, or apportioning purposes, income rom an LLC that is aninvestment partnership (LLC investment partnership) is generally consideredbusiness income (see Appeal o Estate o Marion Markus, Cal. St. Bd. oEqual., May 6, 1986). LLC investment partnerships that are doing businesswithin and outside Cali ornia should apportion Cali ornia source incomeusing Cali ornia Schedule R, Apportionment and Allocation o Income. LLCinvestment partnerships that are doing business solely within Cali orniashould treat all business income o the LLC investment partnership asCali ornia source income.LLC investment partnerships that have Cali ornia source income shouldshow on Schedule K-1 (568), column (e) each members distributive share oCali ornia source income.Generally, members who are nonresident individuals would not record thisincome as Cali ornia source income. However, there are two e ceptions tothe general rule when a nonresident individual may have Cali ornia sourceincome rom an LLC investment partnership. Nonresident individual memberswill be ta ed on their distributive shares o income rom the LLC investmentpartnership i the income rom the quali ying investment securities isinterrelated with either o the ollowing: Any other business activity o the nonresident member. Any other entity in which the nonresident member owns an interest that is

separate and distinct rom the investment activity o the partnership andthat is conducted in Cali ornia.

Nonresident individual members will be ta ed on their distributive share oinvestment income rom an LLC investment partnership i the quali yingsecurities were purchased with working capital o a trade or business thenonresident owns an interest in and that is conducted in Cali ornia (R&TCSection 17955).Corporations that are members in an LLC investment partnership are notgenerally ta ed on their distributive share o LLC income, provided that theincome rom the LLC is the corporations only Cali ornia source income.However, the corporation will be ta ed on its distributive share o Cali orniasource income rom the LLC i either o the ollowing apply: The corporation participates in the management o the investment

activities o the LLC investment partnership. The corporation has income derived rom or attributable to sources within

this state other than income rom the LLC investment partnership.

P Nonresident MembersAn LLC with multiple members is required to le orm FTB 3832 withForm 568 when one or more o its members is a nonresident o Cali ornia.Form FTB 3832 is signed by the nonresident individuals and oreign entitymembers to show their consent to Cali ornias jurisdiction to ta theirdistributive share o income attributable to Cali ornia sources.File orm FTB 3832 or either o the ollowing: The rst ta able period or which the LLC became subject to ta with

nonresident members. Any ta able period during which the LLC had a nonresident member who

has not signed a orm FTB 3832.Separate orms or an individual (or groups o individuals) are permissible.The LLC must maintain and have available or e amination a orm FTB 3832signed by each nonresident member.The LLC must pay the ta or every nonresident member that did not sign a

orm FTB 3832. The LLC is responsible or paying the ta on that nonresidentmembers distributive share o income determined at the highest marginalrate or that member. See General In ormation, Limited Liability Company Taand Fee, or more in ormation.For ta able years beginning on or a ter January 1, 2005, the ta may bereduced by the amount o ta previously withheld and paid by the limitedliability company with respect to each nonconsenting, nonresident member.I the LLC ails to timely pay the ta o such nonresident member, the LLCshall be subject to penalties and interest (R&TC Sections 19132 and 19101).Any amount paid by the LLC on behal o a nonresident individual or oreignentity member will be considered a payment made by the member.An LLC may recover rom the nonresident member the ta it paid on behal othe nonresident member.To claim credit or the ta , the nonresident member needs to attach a copy othe Schedule K-1 (568) to their Cali ornia income ta return.Nonresidents or Part-Year ResidentsNonresidents pay ta to Cali ornia only on their Cali ornia ta able income.For more in ormation, get FTB Pub. 1100, Ta ation o Nonresidents andIndividuals Who Change Residency.

CAUTION:The requirements and procedures discussed above are not relateto the nonresident withholding requirements discussed under GeneralIn ormation, Withholding Requirements.

Q Cancelling a Limited Liability CompanyIn general, LLCs are required to pay the $800 annual ta and le a Cali oreturn until the appropriate papers are led. In order to cancel an LLC, the

ollowing steps must be taken:1. File a timely nal Cali ornia return (Form 568) with the FTB and pay

$800 annual ta or the ta able year o the nal return.2. File Form LLC-4/7, Certi cate o Cancellation, with the Cali ornia S

Cali ornia SOS also requires a domestic LLC to le Form LLC-3, Cero Dissolution. Contact the Cali ornia SOS or more details.The Form LLC-4/7s e ective date will stop the assessment o the $800annual ta or uture ta able years. I Form LLC-4/7 is led a ter the tayear ending date, a subsequent year return and an additional $800 ta mayrequired.For ta able years beginning on or a ter January 1, 2006, the annual ta wnot be assessed i the LLC meets all o the ollowing requirements: The LLC les a timelyFinal Limited Liability Company Return o Incom

or the preceding ta able year, including e tension. The LLC did not do business in Cali ornia a ter the nal ta able year The LLC les the appropriate documents or cancellation with the

Cali ornia SOS within 12 months o the timely ledFinal Limited LiabilitCompany Return o Income.

Short Form CancellationBeginning January 1, 2005, domestic LLCs organized in Cali ornia on or January 1, 2004, can le a Limited Liability Company Short Form Certi co Cancellation (Form LLC-4/8) i the ollowing requirements are met: Form LLC-4/8 is being led within 12 months rom the date the Articl

Organization were led with the SOS. The domestic LLC has no debts or other liabilities (other than ta liabil The known assets have been distributed to the persons entitled thereto o

no known assets have been acquired. The nal ta return or a nal annual ta return has been or will be led

with the FTB. The domestic LLC has not conducted any business rom the time o th

ling o the Articles o Organization. A majority o the managers or members, or i there are no managers o

members, the person or a majority o the persons who signed the Artico Organization, voted to dissolve the domestic LLC.

I the domestic LLC received payments or interests rom investors, tpayments have been returned to those investors.

The LLC must le SOS Form LLC-4/8, with the SOS. The LLC must incla statement that all o the items above have been completed be ore theCali ornia SOS will cancel the LLC.For more in ormation on how to cancel your LLC, contact:By mail: BUSINESS ENTITIES SECTION

CALIFORNIA SECRETARY OF STATEPO BOx 944228SACRAMENTO CA 94244-2280

In person: CALIFORNIA SECRETARY OF STATE1500 11TH STREET 3RD FLOORSACRAMENTO CA 95814

By phone: 916.657.5448O ce hours are Monday through Friday, 8 a.m. to 5 p.m.Website: sos.ca.govEmail address: [email protected] the LLC is being cancelled to be converted to another type o businessentity, be sure to le the appropriate orms with the Cali ornia SOS.Get FTB Pub. 1038, Guide to Dissolve, Surrender, or Cancel a Cali orniaBusiness Entity, or more in ormation.Short Period ReturnI the LLC is ling a short period return or 2010 and the 2010 orms areavailable, the LLC must use the 2009 Form 568 and change the ta able ye

R Withholding RequirementsForeign (non U.S.) Nonresident MembersAs described in IRC Section 1446 and modi ed by R&TC Section 18666,LLC has any income or gain rom a trade or business within Cali ornia, ai any portion o that income or gain is allocable under IRC Section 704 t

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oreign (non U.S.) nonresident member, the LLC is required to withhold taon the allocable amount.State and Federal Di erences Regarding Foreign (non U.S.) NonresidentMembersCali ornia generally con orms to IRC Section 1446 and corresponding ederalrulings and procedures. The main di erences between Cali ornia and ederallaws in this area are:a. The Cali ornia withholding rate is 8.84% or C corporations and 9.55% or

individuals, partnerships, LLCs, and duciaries.b. Income attributable to the disposition o Cali ornia real property is subject

to withholding under R&TC Section 18666.

Domestic (U.S.) Nonresident MembersAn LLC is required to withhold unds or income or ranchise taxes when itmakes a distribution o income to a domestic (U.S.) nonresident member(R&TC Section 18662). This includes prior year income that should have been,but was not previously reported as income rom Cali ornia sources on themembers Cali ornia income tax return. However, withholding is not required idistributions o income rom Cali ornia sources to the member are $1,500 orless during the calendar year or i the FTB directs the payer not to withhold.Domestic (U.S.) nonresident members include individuals who arenonresidents o Cali ornia and corporations that are not quali ed to dobusiness in Cali ornia or do not have a permanent place o business inCali ornia. Domestic nonresident members also include nonresident estates,trusts, partnerships, and LLCs that do not have a permanent place obusiness in Cali ornia. Foreign nonresident members covered under R&TCSection 18666 are not domestic nonresident members.LLCs with income rom both within and outside Cali ornia must make a

reasonable estimate o the ratio, to be applied to the distributions, thatappro imates the ratio o Cali ornia source income to total income. The ratioor the prior year will generally be accepted as reasonable in determining the

Cali ornia part o the distribution subject to withholding. LLCs are required towithhold ta at a rate o seven percent o distributions (including property) oincome rom Cali ornia sources made to domestic nonresident members. Formore in ormation, get Schedule R.The FTB has administrative authority to allow reduced withholding rates,including waivers, when requested in writing. These authorizations may beone-time, annual, or or a longer period. Waivers or reduced withholdingrates will normally be approved when distributions are made by publiclytraded partnerships and on distributions to brokerage rms, ta -e emptorganizations, and tiered LLCs.No withholding o ta is required i the distribution is a return o capital ordoes not represent ta able income or the current or prior years. Althougha waiver is not required in this situation, i upon e amination the FTB

determines that ta withholding was required on a distribution, the LLC maybe liable or the amount that should have been withheld including interest andpenalties.Send waiver requests and inquiries to:

WITHHOLDING SERVICES AND COMPLIANCEFRANCHISE TAx BOARDPO BOx 942867SACRAMENTO CA 94267-0651

Telephone: 888.792.4900or 916.845.4900 (not toll- ree)Withholding payments should be submitted with Forms 592, 592-A,Form 592-B, and Form 592-F.The ta able income o nonresident members is the distributive share oCali ornia sourced LLC income, not the distributed amount. For morein ormation, get FTB Pub. 1017, Resident and Nonresident WithholdingGuidelines.The nonresident withholding requirements and procedures discussedabove are not related to the nonconsenting nonresident members ta paidby an LLC on behal o nonresident members as discussed under GeneralIn ormation, Nonresident Members.

S Check-the-Box RegulationsCali ornia generally con orms to the ederal entity classi cation regulations(commonly known as check-the-bo regulations). These regulations allowcertain unincorporated entities to choose ta treatment as a partnership,a corporation, or a single member LLC (SMLLC) (SB 1234; Stats. 1997,Ch. 608).Generally, any elections made or ederal purposes under the ederal check-the-bo regulations are treated as Cali ornia elections. No separate elections

are allowed. I ederal Form 8832, Entity Classi cation Election, is led the ederal return, a copy should be attached to the electing entitys Cali oreturn or the year in which the election is e ective. The entity should appropriate Cali ornia return.An eligible entity may choose its classi cation. An eligible entity is abusiness entity that is not a trust, a corporation organized under any ederaor state statute, a oreign entity speci cally listed as a per se corporation, other special business entities. Other special business entities under the IRinclude publicly traded partnerships, REMICs, nancial asset securitizatioinvestment trusts (FASITs), or regulated investment companies (RICs). Aneligible entity with two or more owners will be a partnership or ta purpunless it elects to be ta ed as a corporation. For ta purposes, an eligibleentity with a single owner will be disregarded. I the separate e istence oentity is disregarded, its activities are treated as activities o the owner andreported on the appropriate Cali ornia return.ExceptionsThe e ception to the general rule e ists under R&TC Section 23038(b)(2)in the case o an eligible business entity. The e ception does not apply toa business entity which, during the 60 month period preceding January 1,1997, was appropriately classi ed as an association ta able as a corporatioand met all o the ollowing conditions: The business entity was not doing business in Cali ornia. The business entity did not derive income rom sources within Cali o The business entity had no members who were residents o Cali orniaThe eligible business entities are generally:1) Business trusts that were classi ed as corporations under Cali ornia la

but were classi ed as partnerships or ederal ta purposes or ta ab

years beginning be ore January 1, 1997.2) Previously e isting oreign SMLLCs that were classi ed as corporatiounder Cali ornia law but claimed to be partnerships or ederal tapurposes or ta able years beginning be ore January 1, 1997.

These business trusts and previously e isting oreign SMLLCs will continto be classi ed as corporations or Cali ornia ta purposes and must contto le Form 100, unless they make an irrevocable election to be classi edor disregarded the same as they are or ederal ta purposes. See ormFTB 3574, Special Election or Business Trusts and Certain Foreign SinglMember LLCs, and Cal. Code Regs., tit. 18 sections 23038(a)-(b).Cali ornia regulations make the classi cation o business entities under

ederal regulations (Treas. Reg. Sections 301.7701 through 301.7701-3)generally applicable to Cali ornia. I an eligible entity is disregarded orta purposes, it is also disregarded or state ta purposes, e cept that aSMLLC must still pay a ta and ee, le a return, and limit ta credits.Filing Requirements or Disregarded Entities

Beginning with the 2008 ta able year, an SMLLC needs to complete FormSide 1, Side 2, the LLC Income Worksheet, and pay the annual ta and LLee (i applicable).

Schedule B and Schedule K are required to be led i any o the ollowinmet: The income or loss amount reported on Schedule B, line 1 or line 3

through line 11, is $3,000,000 or more. The Total distributive income/payment items, Schedule K, line 21a, i

greater than or equal to $3,000,000 OR less than or equal to $-3,000,00I the SMLLC does not meet the $3 million criteria or fling Schedule Band Schedule K (568), the SMLLC is still required to complete Form 568Side 1, Side 2, the LLC Income Worksheet, and pay the annual tax and L(i applicable). I Schedule K (568) is required to be fled, disregarded eshould prepare Schedule K (568) by entering the amount o the correspoMembers share o Income, Deductions, Credits, etc. attributable to theactivities o the disregarded entity rom the Members ederal Form 10

including Schedules B, C, D, E, F, and Federal Schedule K, or Federal Fo1120 or 1120S (o the owner). SMLLCs do not complete Schedule K-1(Form 568). The LLC should have fled by the 15th day o the 4th monththe taxable year. The single owner would include the various items o indeductions, credits, etc., o the SMLLC on the tax return fled by the ownUtilization o credits attributable to the SMLLC is limited to the regularta liability on the income attributable to the activities o the SMLLC. Thlimitation on the SMLLCs credits is the di erence between: 1) The reguliability o the single owner computed with the items o income, deductioetc., attributable to the SMLLC; and 2) The regular ta liability o the singowner computed without the items o income, deductions, etc., attributablto the SMLLC. It is the responsibility o the single owner to limit the credon the owners ta return. The single owner should be prepared to urnishin ormation supporting the use o any credits attributable to the SMLLC.

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The owner o the SMLLC should per orm the ollowing steps to determine theSMLLCs credit limitation: Compute the owners ta with the SMLLC income, and the owners ta

without the SMLLC income. Complete Schedule P (100, 100W, 540, 540NR, or 541), up to the line

where the credit is to be taken. Determine the credit to be utilized. The amount allowed is the lesser o

either o the ollowing:1. The total credit or the limitation based on the LLCs business income.2. The net ta balance that may be o set by credits on Schedule P (100,

100W, 540, 540NR, or 541) on the line above the line where the credit

is to be taken.The ollowing e ample shows the credit limit calculation or an SMLLC thatis owned by a C corporation. The SMLLC has a Research credit o $4,000.The computation o the C corporations regular ta liability with the SMLLCincome is $5,000. The computation o the C corporations regular ta liabilitywithout the SMLLC income is $3,000. The di erence in ta is $2,000, whichis the C corporations credit limitation on all LLC credits. The owner o theSMLLC then per orms the ollowing steps:1. Completes Schedule P (100), Side 2, down to line 4, column (c). The

amount is $1,000.2. Enters the limitation amount rom Schedule P (100), Side 2, line 4,

column (c) in column ( ).3. Enters the ollowing amounts rom the table on this page on the

Schedule P (100): $4,000 rom column (d) o the table on this page, to Schedule P (100),

Side 2, line 5, column (a); $1,000 rom column ( ) o the table on this page, to Schedule P (100),

Side 2, line 5, column (b); $3,000 rom column (g) o the table on this page, to Schedule P (100),

Side 2, line 5, column (d).(a) (b) (d) (d) (e) (f) (g)

Creditname

Creditamount

Total prioryear creditcarry-over

Total credit:add col. (b)& col. (c)

Limitationbased on

LLC businessincome

Credit usedon Sch P,but not

greater thancol. (d) or

col. (e)

Carry col. (d)minus thesmaller ocol. (e) or

col. ( )

Research $4,000 0 $4,000 $2,000 $1,000 $3,000

T Substitute SchedulesLLCs or their ta pro essional must get approval rom the FTB to use asubstitute schedule, i any o the ollowing apply: The LLC wants to usepaperless Schedules K-1 (568). The LLC does not use the o cial Cali ornia Schedule K-1 (568) preparedby the FTB. The LLC does not use a so tware product with an FTB-approved

Schedule K-1 (568).I computer so tware is used, read the companys user manual to ensureyou have the necessary hardware and printer onts to produce FTB-approved

orms. All printing should be done to the standards speci ed in FTBPub. 1098, Annual Requirements and Speci cations or the Developmentand Use o Substitute, Scannable, and Reproduced Ta Forms. Formore in ormation, go to tb.ca.gov and search orFTB Pub. 10 5D, TaPractitioner Guidelines or Computer-Prepared Returns.LLCs are subject to penalties or ailure to le the appropriate Schedule K-1(568). See General In ormation, Penalties and Interest.To participate in the FTBs substitute orms program, get FTB Pub. 1098,and orm FTB 1096, Agreement to Comply with FTB Pub. 1098, AnnualRequirements and Speci cations.Paperless Schedule K-1 (568)For procedures, ormatting speci cations, and record layouts required toprogram paperless Schedules K-1 (568) get FTB Pub. 1062, Guide or FilingPaperless Schedules K-1 (565 or 568).The transmittal orm FTB 3604, Transmittal o Paperless Schedules K-1 (565or 568) on CD or Diskette, must accompany paperless Schedules K-1 (568)submitted on CD or diskette. Form FTB 3604 is included in FTB Pub. 1062 orin a llable ormat attb.ca.gov.K-1 (565 or 568) TestWare is also available at no charge. K-1 (565 or 568)TestWare helps identi y and correct errors during programming and be oresubmitting the paperless schedules.

K-1 (565 or 568) TestWare includes two programs: K-1 Veri y, edits Schedules K-1 (568) records to ensure the elds are t

correct length and position the FTB requires and produces an edit repor K-1 Convert, converts spreadsheet ormats to standard ed length

ormats so you can use them with K-1 Veri y.Once veri cation is made to ensure paperless Schedules K-1 (568) pass thK-1 Veri y program, send the schedules to the FTB using orm FTB 3604which contains mailing instructions. Multiple LLCs can be put on the sameor diskette. It is not necessary to provide a separate CD or diskette or eacLLC. However, provide each LLC name, SOS le number, and the numberK-1s or that LLC in the space provided on orm FTB 3604.

I the LLC les paperless Schedules K-1 (568), le all Schedules K-1 (56that LLC using the paperless ormat.Do not le paper Schedules K-1 (568)with Form 568 i the LLC has or will le paperless Schedules K-1 (568).Do not le Schedules K-1 (568) on micro che or le ederal Schedules K(1065) with the Form 568.To get the publications and K-1 (565 or 568) go to tb.ca.govand search ortestware .Assistance is available rom our e- le Help Desk at 916.845.0353(not toll- ree).

U Property Subject to IRC Section 179Recapture

Cali ornia will ollow the revised ederal instructions (with some e ceptor reporting the sale, e change, or disposition o property or which an

Section 179 e pense deduction was claimed in prior years by a partnershipLLC, or S corporation.I a gain rom the sale, e change, or disposition or which an IRC Sectioe pense deduction was claimed in a prior year, special rules apply. Membeshould ollow the instructions in ederal Form 4797, Sales o BusinessProperty, Part III, line 22.LLCs should ollow the instructions in ederal Form 4797 with the e cepthat the amount o gain on property subject to the IRC Section 179 recaptumust be included in the total income or the LLC.The gain on property subject to the IRC Section 179 recapture should bereported on the Schedule K and Schedule K-1 as supplemental in ormatioinstructed on the ederal Form 4797.The LLC must provide all o the ollowing in ormation with respect to adisposition o business property i an IRC Section 179 e pense deductionclaimed in prior years:1. Description o the property.

2. Date the property was acquired and placed in service.3. Date the property was sold or other disposition.4. Gross sales price or amount realized.5. Cost or other basis plus e pense o sale (not including the entitys bas

reduction in the property due to IRC Section 179 e pense deduction).6. Depreciation allowed or allowable (not including the IRC Section 179

e pense deduction).7. Amount o IRC Section 179 e pense deduction (i any).8. An indication i the disposition is rom a casualty or the t.9. I this is an installment sale, compute the installment amount by using

method provided in orm FTB 3805E, Installment Sale Income. Enter gain on line 5 o the worksheet.

V Suspension/For eitureI an LLC does not le Form 568 and/or does not pay any ta , penalty, orinterest due, its powers, rights, and privileges may be suspended (in thecase o a domestic LLC) or or eited (in the case o a oreign LLC). Al

contracts entered into during suspension or or eiture are voidable at therequest o any party to the contract other than the suspended or or eitedLLC. Such contracts will remain voidable and unen orceable unless the Lapplies or relie rom contract voidability and the FTB grants relie . SeSections 23301, 23305.1, and 23305.2, or more in ormation.

Additional In ormationCali ornia Use TaxGeneral In ormationThe use ta has been in e ect in Cali ornia since July 1, 1935. It appliespurchases rom out-o -state sellers and is similar to the sales ta paid onpurchases made in Cali ornia.

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In general, LLCs must pay Cali ornia use ta on purchases made rom out-o -state ( or e ample, by telephone, over the Internet, by mail, or in person) iboth o the ollowing apply: The seller does not collect Cali ornia sales or use ta . The LLC uses, gives away, stores, or consumes the item in this state.Example: The LLC purchases a con erence table rom a company in NorthCarolina. The company ships the table rom North Carolina to the LLCsaddress in Cali ornia or the LLCs use and does not charge Cali ornia sales oruse ta . The LLC owes use ta on the purchase.Complete the Use Tax Worksheet on page 13 to calculate the amount due.Extensions to fle. I the LLC requests an e tension to le its ta return, waituntil the LLC les its ta return to report the purchases subject to use ta andto make the use ta payment.Penalty. Failure to timely report and pay the use ta due may result in theassessment o penalties.Changes in use tax reported. Do not le an Amended LLC Return o Incometo revise the use ta previously reported. I the LLC has changes to theamount o use ta previously reported on the original income ta return,contact the State Board o Equalization.For assistance , go to the State Board o Equalizations website atboe.ca.gov or call their Ta payer In ormation Section at 800.400.7115 or TTY/TDD800.735.2929. Income ta in ormation is not available at this number.

Specifc InstructionsLLC Income Worksheet InstructionsFor purposes o this worksheet, Total Cali ornia Income means totalincome rom all sources derived rom or attributable to this state. Totalincome means gross income, plus the cost o goods sold that are paid orincurred in connection with the trade or business o the ta payer attributed toCali ornia. Total income rom all sources derived or attributable to this state isdetermined using the rules or assigning sales under R&TC Sections 25135and 25136 and the regulations thereunder, as modi ed by regulations underR&TC Section 25137, i applicable, other than those provisions that e cludereceipts rom the sales actor.Disregarded entities that do not meet the ling requirements to completeSchedule B or Schedule K should prepare the LLC Income Worksheet byentering the Cali ornia amounts attributable to the disregarded entity rom theMembers Federal Schedule C, E, F, or additional schedules associated withother activities. For more in ormation about Cali ornia income assignment,see the ne t paragraph.Determining Total Income From All Sources Derived From or Attributable

to Cali orniaI the LLC business is wholly within Cali ornia, the total income amount isassigned to Cali ornia and is entered on the LLC Income Worksheet. I theLLC conducts business within and outside o Cali ornia, the LLC must assignits total income, item by item, to Cali ornia based on the ollowing rules:Sales o Tangible PropertyTotal income rom sales o tangible personal property with a destination inCali ornia (e cept sales to the U. S. Government) are attributable to Cali orniai the property is delivered or shipped to a purchaser within Cali orniaregardless o the reight on board point or other conditions o sale. Totalincome rom sales o tangible personal property (e cept sales to the U. S.Government) which are shipped rom an o ce, store, warehouse, actory,or other place o storage within Cali ornia are assigned to Cali ornia unlessthe seller is ta able in the state o destination. Any transportation o goodsby vehicle is a orm o shipment, whether the vehicle is owned by the seller,the purchaser, or a common carrier. I a seller trans ers possession o goodsto a purchaser at the purchasers place o business in Cali ornia, the sale is a

Cali ornia sale. However, i goods are trans erred to the purchasers employeeor agent at some other location in Cali ornia and the purchaser immediatelytransports the goods to another state, the sale is not a Cali ornia sale. (SeeFTB Legal Ruling 95-3).Total income rom sales o tangible personal property to the U.S. Governmentare attributable to Cali ornia i the property is shipped rom Cali ornia eveni the ta payer is ta able in the state o destination. Only sales or which theU.S. Government makes direct payment to the seller according to the termso a contract constitute sales to the U.S. Government. Thus, as a general rule,sales by a subcontractor to the prime contractor, the party to the contractwith the U.S. Government, do not constitute sales to the U.S. Government.

Sales o Other Than Sales o Tangible Personal PropertyTotal income rom sales, other than sales o tangible personal property, arattributable to Cali ornia i either o the ollowing applies:1. The income-producing activity related to the sale is per ormed wholly

within Cali ornia.2. A portion o the income-producing activity is per ormed outside o

Cali ornia but a greater portion o this activity is per ormed withinCali ornia than in any other state, based on costs o per ormance.

Income-producing activity means the transactions and activity directlyengaged in by the LLC in the regular course o its trade or business or thultimate purpose o earning gains or pro ts. Income producing activity

applies to each separate item o income. Income-producing activity doenot include transactions and activities per ormed on behal o an LLC, suthose conducted by an independent contractor.Example: LLC A conducts its business in Cali ornia and Nevada. LLC Amaintains a bank account located in Cali ornia that generates interest incoIn assigning the interest income or ee purposes, i there is an incomeproducing activity per ormed by the managing member, the income will bassigned to the state where the managing member is located, regardless othe act that the bank account is located in Cali ornia. Accordingly, incoproducing activity includes but is not limited to the ollowing:(1) The rendering o personal services by employees or the utilization o

tangible and intangible property by the ta payer in per orming a servi(2) The sale, rental, leasing, licensing, or other use o real property.(3) The rental, leasing, licensing, or other use o tangible property.(4) The sale, licensing, or other use o intangible personal property.Costs o per ormance means direct costs determined in a manner

consistent with generally accepted accounting principles and in accordancwith industry practices in the LLCs trade or business.Special Rules. The ollowing are special rules to determine i receipts rthe income-producing activities are attributable to Cali ornia:1. Total income rom the rendering o personal services by employees o

the use o tangible and intangible property by the LLC in per orminga personal service are attributable to Cali ornia to the e tent that thepersonal services are per ormed within Cali ornia. See FTB Legal Ru2005-1 or the de nition o personal services.

When personal services are per ormed within and outside Cali ornia,usually the services per ormed in each state will constitute separate incomproducing activities. In such cases, the personal service total income ismeasured by the ratio o time spent within Cali ornia versus the time spenper orming services everywhere.Example: LLC A is an investment LLC and manages intangible property. LA has a managing member in Cali ornia as well as a managing member inNew York. During the year, rom their activities o managing the intangibassets, LLC A earns total income o $700,000. The activities o the manaare personal services and the total income earned rom these services canbe split between New York and Cali ornia based on the time spent by the tmanagers in per orming their services or the LLC. I the Cali ornia mamember spent 600 hours and the New York managing member spent 400hours, then 600 o the total 1000 hours were per ormed in Cali ornia and60% (600/1000) o the total income, or $420,000 would be includable as tincome or purposes o computing the Cali ornia LLC ee.Time spent in per orming personal services includes the amount o timee pended in the per ormance o a contract or other obligation that givesrise to the total income. Personal services not directly connected with theper ormance o the contract or other obligation ( or e ample, time e penin negotiating the contract) is e cluded rom the computations.2. Total income rom the sale, rental, leasing, licensing, or other use o r

property are attributable to Cali ornia i the real property is located w

Cali ornia.Example: LLC A owns an apartment comple in Cali ornia. The managinmembers o LLC A are located in Nevada. The total income derived romCali ornia apartment comple (the rental income) is attributable to Cali oand computing the Cali ornia LLC ee.Example: LLC A owns an apartment comple in Nevada. The managingmembers o LLC A are located in Cali ornia. The total income derived Nevada apartment comple (the rental income) is attributable to Nevada athere ore not includable in the calculation o the LLC ee.3. Total income rom the rental, leasing, licensing, or other use o tangib

personal property are attributable to Cali ornia i the property is locatwithin Cali ornia.

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I tangible personal property is located within and outside o Cali ornia duringthe rental, lease, or licensing period, total income attributable to Cali orniais measured by the ratio o time the property was physically present or wasused within Cali ornia bears to the total time or use o the property during theperiod.Alternative Methods. There are alternative methods to assign total incometo Cali ornia that apply to speci c industries. These rules are contained inthe regulations adopted pursuant to R&TC Section 25137. I the LLC is inone o these lines o business, the sale assignment methodology employedin the regulation applicable to the LLCs line o bu

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