I formed an LLC last year for a small consulting side gig. I've only had two clients since then and one was a friend. I pay the annual state fee and a registered agent fee but I'm barely using the LLC. Is there any point keeping it active? Should I just let it dissolve? I feel like I'm paying for something I don't use, but I also don't want to lose the ability to take on work later.
LLC
I started an LLC for my side hustle and barely use it
If its a single-member LLC and you have no contracts or active clients, dissolving is probably cheaper than maintaining it. You can always form again later. The main thing to check is whether your state has a minimum franchise tax that keeps accruing even if you're inactive.
What state? That changes the math a lot.
I'm in California. The annual fee plus the registered agent is around $900 total.
California makes this a different conversation. The $800 minimum franchise tax is due every year regardless of income, and the annual report fee is separate. If you're not generating revenue, you're paying roughly $800+ a year for an entity that isn't doing anything. That's a strong case for dissolving.
Wait, is the $800 due even in the first year? I thought there was a first-year exemption for new LLCs.
There is a first-year exemption for the annual tax, but it's not automatic in every case. You have to qualify and file the right forms. If they formed last year and already paid, that year is done. The question is what happens next.
I'd also look at whether the the friend-client thing was invoiced through the LLC or personally. If it was informal and just Venmo, the LLC hasn't really been used for liability protection anyway, which weakens the reason to keep it.
Dissolving in CA means filing the appropriate dissolution forms and settling any outstanding tax. It's not free but it stops the bleeding. Make sure you file final returns too, otherwise ghe FTB keeps sending notices.
I was in a similar spot with a design LLC. Kept it for two years thinking I'd rapm up, nevr did. The fees added up and I dissolved it. Forming again when I actually had work was straightforward. Not saying that's right for everyone but the 'I might need it later' reason cost me about $1,600.
Does dissolving affect your personal credit or anything?
Not unless you have debts or a business credit line tied to it. A dorrmant single-member LLC with no debts is usually clean to close.