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Partners’ Shares of Income, Credits, Deductions,

attach federal Schedules K-1 (1065). The LLC

Schedule T — Nonconsenting

etc.

should also provide each member with a copy of

Nonresident Members’ Tax

either the Member’s Instructions for Schedule K-1

In column (c), enter the adjustments resulting

Liability

(568) or specific instructions for each item

from differences between California and federal

reported.

law (not adjustments related to California source

Use Schedule T to compute the nonconsenting

Determining the Source of the LLC’s Income for

income). In column (d), enter the worldwide

nonresident members’ tax liability to be paid by the

a Resident Member

income computed under California law.

LLC. List the names and identification numbers of

A resident member should include the entire

all nonresident members who have not signed a

For members to comply with the requirements of

distributive share of LLC income in their

form FTB 3832 and have not consented to be

IRC Section 469, trade or business activity

California income. If the LLC apportions its

subject to California tax. Also, list the nonresident

income (loss), rental activity income (loss), and

income, the member may be entitled to a tax

members’ distributive share of income.

portfolio income must be considered separately

credit for taxes paid to other states. The member

by the member. Rental activity income (loss) and

To compute the amount of tax that must be paid by

should be referred to Schedule S, Other State Tax

portfolio income are not reported on Form 568,

the LLC on behalf of a nonconsenting nonresident

Credit, for more information.

Side 2 so that these amounts are not combined

member, multiply such member’s distributive share

Determining the Source of the LLC’s Income for

with trade or business activity income (loss).

of income by the following tax rates:

a Nonresident Member

Instead, these amounts are reported on

• 8.84% if the member is a C corporation; or

Schedule K, line 2, line 3, and line 4.

• 9.3% if the member is an individual,

Business Income: Regardless of the classification

partnership, LLC, estate, or trust; or

of income for federal purposes, the LLC’s income

Compliance with LLC Filing Requirements

• 1.5% if the member is an S corporation.

from California sources is determined in

To help ensure the accurate and timely process-

accordance with California law (Cal. Code Regs.,

ing of the LLC’s Form 568, please verify the

Note: Each member's Nonconsenting Nonresi-

tit. 18 section 17951-4). If the LLC conducts:

following:

dent Members’ Tax may be reduced by the

amount of tax previously withheld under R&TC

• A trade or business wholly within California,

• A Schedule K-1 (568) has been attached to

Section 18662 and paid by the limited liability

then income from that trade or business is

Form 568 for each member included on

company on behalf of such member.

California source income;

Form 568, Side 1, Question J. LLCs eligible

• A business within and outside California, but

for the reduced filing program, see General

Multiply column c by column d and put the result

the part within the state is so separate and

Information D, Who Must File.

in column e for each nonconsenting nonresident

distinct that it can be separately accounted

• The attached Schedule K-1 (568) contains the

member. Reduce column e by the amount in

for, then only that separate income from

member’s correct name, address, and

column f and put the net amount in column g for

within the state is California source income; or

identifying number.

each nonconsenting nonresident member.

• A single trade or business within and outside

• Items A through I and Questions are

The tax being paid by the LLC on behalf of

California;

completed on Schedule K-1 (568), Side 1.

nonconsenting nonresident members is due on

• The appropriate entity type box (Schedule K-1

then California source business income of that

the 15th day of the 4th month following the close

(568), Side 1, Question A) is checked for each

trade or business is determined by apportion-

of the LLC’s taxable year.

member.

ment. The LLC should apportion business income

Reminder: All members must file a California tax

• All attached Schedules K-1 (568) reconcile to

using the Uniform Division of Income for Tax

return. The completion of Schedule T or form

Schedule K.

Purposes Act (R&TC Sections 25120 through

FTB 3832 does not satisfy the member’s

• The member’s percentage, on Schedule K-1

25139). Special rules apply if the LLC has income

California filing requirement. Corporate members

(568), Question C, is expressed in decimal

that is not attributable to the trade or business of

are also considered doing business in California

format and carried to four decimal places (i.e.,

the LLC (nonbusiness income).

and may have additional filing requirements. For

33.5432). Do not print fractions, percentage

Nonbusiness Income: Nonbusiness income

additional information get, FTB Pub. 1060, Guide

symbols (%), or use terms such as “Various.”

attributable to real or tangible personal property

for Corporations Starting Business in California.

• Substitute computer-generated Schedule K-1

(such as rents, royalties, or gains or losses)

Nonresident individuals may qualify to file a

(568) forms must be approved by the FTB.

located in California is California source income

group Form 540NR and should get FTB Pub.

Schedule K-1 (568)

(Cal. Code Regs., tit. 18 section 17951-3 and

1067, Guidelines for Filing a Group Form 540NR.

The Schedule K-1 (568) details each member’s

R&TC Sections 25124 and 25125). Enter this

Schedule K (568) and Schedule

distributive share of the LLC’s income, deduc-

information on the appropriate line of

tions, credits, etc. The LLC completes the entire

K-1 (568) — Member’s Share of

Schedule K-1 (568). If the LLC believes it may

Schedule K-1 (568) by filling out the member’s

have a unitary member, the information for that

Income, Deductions, Credits, etc.

and LLC’s information (name, address, identifying

member should also be entered in Table 2, Part B,

numbers), Questions A through I and the

Purpose of Schedules

for that member.

member’s distributive share of items.

Schedule K (568) is a summary schedule for the

The source of nonbusiness income attributable to

LLC’s income, deductions, credits, etc. and

Note: For members with PMB addresses, include

intangible property depends upon the member’s

Schedule K-1 (568) shows each member’s

the designation number in the member’s address

state of residence or commercial domicile.

distributive share. The line items for both of these

area. Precede the number (or letter) with “PMB.”

Individuals generally source this income to their

schedules are the same unless otherwise noted.

Example: If a husband and wife each had an

state of residence and corporations to their

One copy of each Schedule K-1 (568) must be

interest in the LLC, prepare a separate

commercial domicile, R&TC Sections 17951

attached to the Form 568 when it is filed unless

Schedule K-1 (568) for each spouse. If a husband

through 17955.

the LLC wishes to file paperless Schedules K-1

and wife held an interest together, prepare a

Note: Because the determination of the source of

(568), see General Information T, Substitute

single Schedule K-1 (568) since they are

intangible nonbusiness income must be made at

Schedules, for additional information.

considered to be one member.

the member level, this income is not entered on

Be sure to give each member a copy of their

For each individual member, enter the member’s

Schedule K-1 (568), column (e). It is only entered

respective Schedule K-1 (568). The LLC should

social security number (SSN). For all other

in Table 1.

also include a copy of the Member’s Instructions

members enter their FEIN. However, if a member

Completing Schedule K-1 (568)

for Schedule K-1 (568) or specific instructions for

is an individual retirement arrangement (IRA),

• In column (b), enter the amounts from federal

each item reported. These items should be

enter the identifying number of the custodian of

Schedule K-1 (1065).

provided to the member on or before the due date

the IRA. Do not enter the SSN of the person for

• In column (c), enter the adjustments resulting

of the Form 568.

whom the IRA is maintained.

from differences between California and

Schedule K (568) Only

The LLC files one California Schedule K-1 (568)

federal law for each specific line item.

In column (b) on Schedule K (568), Members’

for each member with the LLC return and gives

Shares of Income, Deductions, Credits, etc., enter

one copy to the appropriate member. Do not

the amounts from federal Schedule K (1065),

Form 568 Booklet 2005

Page 13

Instructions For Form 568 - Limited Liability Company Return Of Income - State Of California Franchise Tax Board - 2005 Page 13

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