Instructions For Form 568 - Limited Liability Company Return Of Income

Form 568 Instructions

of return the owner will file. This owner will be responsible for

deductions and deductions allocable to portfolio income are

limiting any credits attributable to the disregarded entity.

separately reported on Schedule K (568) and Schedule K-1

(568).

The LLC must treat the failure of the sole owner to sign this

consent in the same manner as the failure of a nonresident to

Federal reporting requirements for organization and

sign form FTB 3832. See the Specific Line Instructions for

syndication expenses and uniform capitalization rules apply for

Schedule T.

California.

If the single owner of the LLC signs the consent, only Form 568,

Line 16a – Depreciation and Amortization

Side 1, and payment of the amount due is required. Multiple

Enter on line 16a only the total depreciation and amortization

member LLCs will complete the remaining schedules, as

claimed on assets used in a trade or business activity.

appropriate.

Complete and attach form FTB 3885L, Depreciation and

Amortization (included in this booklet), to figure depreciation and

Schedule A — Cost of Goods Sold

amortization. Transfer the total from form FTB 3885L, line 6 to

Use Schedule A on Side 2 of Form 568 to report the cost of

Form 568, Side 2, line 16a, or federal Form 8825, as

goods sold for the taxable year.

appropriate (use California amounts). See the instructions for

form FTB 3885L for more information.

California’s reporting requirements for LLCs are generally the

same as the federal reporting requirements for partnerships.

Do not include any expense deduction for depreciable property

Follow the instructions for federal Form 1065, Schedule A.

(IRC Section 179; Enterprise Zones, R&TC Section 17267.2;

Los Angeles Revitalization Zone, R&TC Section 17266;

Schedule B — Income and Deductions

Targeted Tax Area, R&TC Section 17267.6; and Local Agency

Military Base Recovery Area, R&TC Section 17268) on this line.

Line 1

This expense is not deducted by the LLC. Instead, the expense

through

is passed through separately to the members and is reported on

Line 8 – California’s reporting requirements for LLCs are generally the

line 9 of Schedule K (568) and Schedule K-1 (568).

same as the federal reporting requirements for partnerships.

Schedule L — Balance Sheets

Follow the instructions for federal Form 1065, line 1 through

line 8.

California’s reporting requirements for LLCs are the same as the

Note: Use worldwide amounts determined under California law

federal reporting requirements for partnerships. The amounts

when completing these lines.

reported on the balance sheet should agree with the books and

records of the LLC and should include all amounts whether or

As with the federal reporting requirement, include only trade or

not subject to taxation. Attach a statement explaining any

business activity income on line 1 through line 8. However, for

differences. Follow the instructions for federal Form 1065,

California tax purposes, business income of the LLC is defined

using the rules set forth in R&TC Section 25120. Therefore,

Schedule L.

certain income that may be portfolio income for federal

Note: Domestic LLCs with 10 or fewer members may not have

purposes may be included as business income for California

to complete Schedule L. See the instructions for Question R for

sourcing purposes. Do not include rental activity income or

the specific requirements to qualify for this exception.

portfolio income on these lines. Rental activity income and

Schedule M-1, Reconciliation of Income (Loss) per

portfolio income are separately reported on Schedule K (568)

and Schedule K-1 (568). Rental real estate activities are also

Books With Income (Loss) per Return, Schedule M-2,

reported on federal Form 8825, Rental Real Estate Income and

Expenses of a Partnership or an S Corporation. Attach a copy

Analysis of Members’ Capital Accounts and Schedule

of federal Form 8825. Use California numbers and attach a

K-1 (568), Item I — Analysis of Member’s Capital

statement reconciling any differences between federal and

California amounts.

Account

Line 5 – Net Farm Profit (Loss)

Domestic LLCs with 10 or fewer members may not have to

complete Schedule M-1 and Schedule M-2 or Item I (Schedule

Enter the LLC’s net profit (loss) from federal Schedule F

K-1 (568)). See the instructions for Question R for the specific

(Form 1040), Profit or Loss From Farming. Attach federal

Schedule F (Form 1040) to Form 568. If the amount includable

requirements to qualify for this exception.

for California purposes is different from the amount on federal

If the LLC is required to complete Schedule M-1 and Schedule

Schedule F (Form 1040), enter the California amount and attach

M-2, the amounts shown should agree with the LLC’s books

an explanation of the difference.

and records and the balance sheet amounts. Attach a statement

explaining any differences.

Line 6 – Net Gain (Loss) from Schedule D-1

Note: Use worldwide amounts determined under California law

Include only ordinary gains or losses from the sale, exchange or

when completing Schedule M-1. Also, the amounts on Schedule

involuntary conversion of assets used in a trade or business

M-2 should equal the total of the amounts reported in Item I,

activity. Ordinary gains or losses from the sale, exchange or

column (c), of all the members’ Schedule K-1 (568).

involuntary conversion of rental activity assets must be reported

separately on Schedule K (568) and Schedule K-1 (568),

Schedule O — Amounts from Liquidation Used to

generally as part of the net income (loss) from the rental

activity.

Capitalize a Limited Liability Company

An LLC that is a member in another LLC or partner in a

Complete Schedule O if ‘‘initial return’’ is checked in Question I

partnership must include on Schedule D-1, Sales of Business

of Form 568.

Property, its share of ordinary gains (losses) from sales,

Schedule O is a summary of the entities liquidated to capitalize

exchanges or involuntary conversions (other than casualties or

the LLC and the amount of gains recognized in such

thefts) of the other LLC’s or partnership’s trade or business

liquidations.

assets.

Include the complete names and identification numbers of all

Line 9

entities liquidated. Check the appropriate box for the type of

through

entity liquidated. Include the amount of liquidation gains

Line 21 – California’s reporting requirements for LLCs are generally the

recognized in order to capitalize the LLC.

same as the federal reporting requirements for partnerships.

Schedule T — Nonconsenting Nonresident Members’

Follow the instructions for federal Form 1065, line 9 through

line 21.

Tax Liability

Note: Use worldwide amounts determined under California law

Use Schedule T to compute the nonconsenting nonresident

when completing these lines.

member’s tax liability to be paid by the LLC. List the names and

As with the federal reporting requirements, include only trade or

identification numbers of all nonresident members who failed to

business activity deductions on line 9 through line 20. Do not

sign form FTB 3832 and consent to be subject to California tax.

include any rental activity expenses or deductions that are

Also, list the nonresident member’s distributive share of income.

allocable to portfolio income on these lines. Rental activity

Form 568 Booklet 1998

Page 9

Instructions For Form 568 - Limited Liability Company Return Of Income - 1998 Page 8

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