Taxes · CA qualification

One year having a DE C corp qualified in California but still bootstrapping - tax / other filing obligations?

Stefan Broda Partner Program Manager at Atlassian

February 4th, 2014

Good Day,

first of all, big thanks for the great feedback on my previous questions. This is an amazing community!

I was wondering if other people are in a similar situation... One year into the startup, C corporation founded a year ago, Qualification of business in CA done but still haven't found that product / market fit. Revenue in 2013 under 4k and expenses way above. 

I'd like to compile a list of ToDos in these circumstances so we can share them with other CA qualified DE corporated startups. 

Also, due to the low revenue - have some of you filed state / federal taxes / annual report yourself without help of a CPA?

Thanks a lot in advance for the feedback! 

Ezra Goldman

February 4th, 2014

I believe you can get the first year of CA franchise taxes waived but you have to register your business in the state of CA. 

Frederic, what did you get for your $800? I spent $600 for my CPA to do one small task that took him less than a day. I wouldn't recommend him if you are looking to bootstrap!

Stefan Broda Partner Program Manager at Atlassian

February 5th, 2014

Thanks a lot for the tips! @Frederic, always open for recommendation. 

Now did anybody of you file yourself without a CPA? 

Also, how did you get the CA franchise tax waved?

Douglas Tarr Entrepreneur and Software Architect

February 4th, 2014

Hi Stefan -

I went through this.  Basically, I had a Delaware C Corp and dreams of glory, and live in California.  My revenue was even smaller than yours, but i had to:

- Register with a Delaware Agent ($125 / year)
- Pay Delaware Minimum Taxes -almost lost my breakfast when the default $74,000 tax bill that Delaware assesses arrived  (http://capgenius.com/2011/03/02/de-franchise-tax/) 
- Pay $800 annual California Franchise Tax
- Pay a CPA several hundred dollars to file your C Corp 1120
- File annual report 

Most of the cost is the California Franchise Tax, which you have to pay no matter what kind of entity you are.

- Doug


Mark Neild Empowering quietly creative people to prosper through innovative yet authentic and engaging business models

February 5th, 2014

Stefan Do not quite get what you mean by a list of todos... In terms of filing, have a look at www.xero.com. It won't give you advice, but is a very easy product to use and will keep your books straight and reconciled with bank account. Not sure about California, but in the UK I can file online with about 2 clicks once the accounts are up to date and I know they offer a product in US. Mark

Frederic Laruelle Founder & CEO at inkWire, inc.

February 4th, 2014

Hi Stefan, That's a pretty interesting startup you got there! ;-) My startup has the same DE/CA setup and I highly recommend getting a CPA. It has cost me so far about $800/year and it's well worth it. Let me know if you'd like a CPA recommendation. Cheers, Fred Fred~

Joe Burritt Finance, real estate, technology

February 5th, 2014

Great info everyone.  I'm looking to start an LLC in Delaware, (I live in CA) and would like to know how much savings I will receive the first year and years to come?  I will be doing revenue at less than 100k for first two years.  Then will be revenue 100k+ for years to go.

Rachel Wolan Director of Product Management at Talkdesk

February 5th, 2014

Hey Stefan, I am in the exact same situation. If you do compile a list, I would love it if you could share a copy. Thanks, Rachel

Frederic Laruelle Founder & CEO at inkWire, inc.

February 5th, 2014

@Stefan Sure! here you go: http://www.bndcpas.com/home ask for Dan, tell him I sent you ;-) Dan is great, he understands the challenges faced by entrepreneurs... Fred~

Frederic Laruelle Founder & CEO at inkWire, inc.

February 4th, 2014

@Ezra,
$800 for complete annual filings :-)


Anonymous

February 4th, 2014

Same situation but what I did was pick up the TurboTax business version (about $120 but windows only :( ) then had the CPA review. Save yourself some money, you should know the finances anyway at this point.

Also, don't let the $70k DE number scare you too much. When I first looked at their equation I was shocked as well and expecting the worst, but my attorney said it would be a few hundred and he was right--remember this is a business friendly state. Paid $400 ($50 is a filing fee) -- that's less than CA.