Unlike an IRA LLC in California where the IRA is the member of the LLC which is subject to the California annual franchise tax of $800, a solo 401k LLC where the solo 401k is the member of the LLC is not subject to the $800 annual franchise fee provided the solo 401k LLC solely invests in passive real estate (i.e., buy and hold rentals). If the Solo 401k LLC is used to invest in assets other than real estate, the exemption will be lost.
The exemption from the California Franchise Tax is found in R&TC Section 23701x.
Applying for the Waiver
- Complete CAFT Form 3500: https://www.ftb.ca.gov/forms/misc/3500.pdf
- The fee for processing the Application is $25
Again, this exemption only applies to solo 401k plans, profit sharing plans, defined benefit plans, stock bonus plans, and does not apply to IRAs including SEP IRAs.
