Enterprise Zone Credits For California Corporations

These are economically challenged areas where there is a desperate need for businesses to come and set up and offer work to people from the area, and in order to attract businesses to a Zone, Enterprise Zone credits were put into place. In addition to a host of state-based Enterprise Zone credits, your company may also qualify for federal hiring credits as well.

Hiring credits are available if you hire employees from certain targeted groups. These may include disabled veterans with qualifications, those who have been recently laid off or been threatened with layoff, Native Americans, Pacific Islanders, summer youth hires as well as youth and young adults from designated communities, qualifying ex-felons, people who have recently been on food stamps, SSI or temporary assistance for needy families, as well as other qualified youth. Each of these qualified employees can earn your company that hires them up to $13,000 annually in Enterprise Zone credits.

Other tax credits incentives are available as federal hiring credits. WOTC California is the name of the program, and employees qualify based on similar groups as for the state tax incentive. For WOTC California, your corporation may earn anywhere from $2,400 to $4,800 per qualified employee.

Many of these hiring tax credits may be available to you for previous years as well. If you realize that you could have qualified for them three years or even more in the past, your accountant may file an amended return on your company’s behalf so that you can claim them. As well, if you want to carry over your tax credits so that they are available for your use next tax season, this may also be possible.

Other Enterprise Zone credits help your corporation save energy. When you purchase hybrid and diesel-powered vehicles for business use, your company may qualify for tax credits. If you install energy-saving equipment or pollution-controlling equipment at your place of business, you may then be able to claim Enterprise Zone credits and significant tax deductions. Companies located in an Enterprise Zone may also qualify for sales and use tax credits of up to ten percent of the purchase cost of research and development or manufacturing and processing equipment, as well as energy conservation or water or air pollution equipment.

You can discuss these and other tax credits incentives with your Long Beach accountant, who can provide more information.

The California LLC – Taxed to Death?

California is renowned for being about as business unfriendly as any state. If you aren’t getting taxed over here, you are getting hit with some odd fee over there. The weather makes up for it, but sometimes you really have to wonder about whether it is all worth it. This is particularly true for small businesses who form limited liability companies only to get hit upside the head with a host of surprises.

The first surprise is one you could only find in California. The LLC is charged an $800 annual fee for the “privilege of doing business in California”. Oh, joy. The fee is due not at the end of your first year, but within a few months of forming your business. Yes, the door is barely open and you are already getting hit with state expenses!

The next surprise comes when you start bringing in some business. The wicked surprise goes by the name “gross revenue tax.” In addition to your $800 annual fee discussed above, you have to pay a tax based on your gross revenues. The tax doesn’t start until you are bringing in at least $250,000 a year, but it is important to remember what we are talking about here. This is a “gross” revenue tax. An example will help explain the significance of this.

Imagine I have a store selling some high priced item. My business plan calls for me to lose money my first three years as business builds up. The first year I bring in $125,000 and lose $10,000 as expected. Then year two rolls around. I bring in $260,000 in receipts and lose another $10,000. Much to my surprise, I own an additional $900 in gross revenue tax. Yes, this is true even though I didn’t make a profit!

So, should you avoid forming a California LLC? No, not really. It is still a great choice. A corporation in California has to pay the same $800 fee, but not the gross revenue tax. As long as you know what you are getting into, the LLC is still worth the financial aggravation.