Limited Liability Partnerships
- What is A Limited Liability Partnership?
- Doing Business in California and In other States
- Filing Requirements and Related Questions
- Helpful Publications
What is A Limited Liability Partnership?
A limited liability partnership is a partnership that provides its partners a limitation on personal liability similar to limited partnerships. However, a limited partnership cannot become a limited liability partnership. Instead, qualified general partnerships register with either the California Secretary of State or another state to become limited liability companies.
Important: To qualify as a limited liability partnership, all of the partners of a general partnership must be licensed to practice public accounting or law. Starting, January 1, 1999, this was extended to include architecture.
A general partnership can also qualify if it is:
- Related to a limited liability partnership (other than an architecture limited liability partnership) and provides services or facilities for that limited liability partnership, or
- Related to a limited liability partnership (other than an architecture limited liability partnership) and provides services that are related or complementary to that limited liability partnership.
Caution: Limited liability partnerships and limited partnerships are not the same. For more information on limited partnerships please see the Limited Partnerships section.
Related Partnership: A partnership is considered related to a limited liability partnership (other than architecture limited liability partnership) if:
- A majority of the partners in the limited liability partnership are also partners in the related partnership; or
- A majority of the partners in the related partnership are also partners in the limited liability partnership; or
- A majority of the partners, of both the related partnership and the limited liability partnership, hold interests in or are members of another entity and both perform services for that entity; or
- The limited liability partnership or related partnership controls, is controlled by, or is under common control with the other through one or more intermediaries.
Registering to Do Business in California
All foreign limited liability partnerships doing business in California are required to register with the California Secretary of State. Domestic partnerships that do not register with the California Secretary of State are not considered limited liability partnerships.
For more information about registering a limited liability partnership, call Secretary of State's Limited Liability Partnership Unit at 1-916-653-3795, or visit their Website at: sos.ca.gov.
Doing Business in California and In Other States
Limited liability partnerships that do business in California and other states must apportion their income using Schedule R, Apportionment and Allocation of Income.
Example: In 2000, a Nevada limited liability partnership opens an office in California. Since the limited liability partnership is doing business in both Nevada and California, it must file a California Form 565, Partnership Return of Income and use Schedule R to apportion income between the two states.
Helpful publications are located at the end of this section.
Filing Requirements and Related Questions
- What form do I file for my limited liability partnership?
Limited liability partnerships file Form 565, Partnership Return of Income.
Reduced Filing Program
To qualify for the reduced filing program, a limited liability partnership must:
- Be registered in California; and
- Not be doing business in California; and
- Not have any California source income.
Under this program, a limited liability partnership's filing requirement is satisfied by:
- Completing a Form 565 with all supplemental schedules;
- Paying the annual tax of $800 by the original return filing due date;
- Completing and attaching California Schedule K-1 (565) only for partners with California addresses;
- Writing “SB 1106 Filing” in red on top of the front page of Form 565; and
- Entering the total number of partners (including partners with California addresses) in Question J, Side 2, of Form 565.
- When is Form 565 Due?
Form 565 is due on the 15th day of the fourth month after the close of the year. If the due date falls on a Saturday, Sunday, or legal holiday, the filing date is the next business day.
Short accounting period (15 days or less)
New limited liability partnerships that have an initial income year of 15 days or less and do no business during that time are not required to file a return or pay the limited liability partnership annual tax for that period. To qualify for this treatment, the limited liability partnership must have registered with the California Secretary of State on or after the following dates:
|Month of Registration and Taxable Year ending:||Registered on:|
|January, March, May, July, August, October and December
(31 day month)
|17th or after|
|April, June, September and November
(30 day month)
|16th or after|
|February-28 day month
February-29 day month
|14th or after
15th or after
Automatic Six-Month Extension to File:
California grants an automatic six-month extension beyond the return due date to file Form 565. A return filed after the extended due date is treated as delinquent, with penalties computed from the original return due date.
Important: An extension to file is not an extension to pay. Tax is due on or before the original return due date regardless of an extension to file.
To avoid penalties the limited liability partnership must pay the annual fee by the original return due date. The limited liability partnership should submit Form 3538, Payment Voucher for Automatic Extension for Limited Partnerships, Limited Liability Partnership's and REMICs with payment by the original return due date.
- What Is The Limited Liability Partnership Annual Tax?
The limited liability partnership annual tax is $800. To be subject to the tax, the limited liability partnership must, for at least one day during the year, be:
- Doing business in California, and/or
- Registered with the California Secretary of State.
Doing Business: is defined as actively engaging in any transaction for the purpose of financial gain or profit.
The annual tax must be paid by the original return due date of the partnership return.
Limited Partnership Information
- Partnerships (Publication 541 - Federal)
- Instructions to Partnership Return of Income (Form 565 - State)
Doing Business in and outside of California
- Application and Interpretation of Public Law 86-272 (Publication 1050 - State)
- Guidelines for Corporations Filing a Combined Report (Publication 1061 - State) - This publication can be used by multi-state partnerships
- Apportionment and Allocation of Income (Schedule R - State)