If you own an interest in a California business or are considering investing in one, be careful about how you structure your ownership. LLCs are very common these days to limit liability, but using them could cost you in taxes. Not only does California charges an $800 annual tax to any LLC that does business in the state, it also considers an LLC to be doing business in the state if it owns an interest in another LLC that does business in the state. So if you use an LLC to hold an interest in another LLC that does business in California, both LLCs owe the tax, even if the business makes a loss.
