From the desk of partner Brooke Pollard: I am having a significant number of discussions with clients about whether to form a new legal entity in 2018 or 2019. Generally, if the entity is formed during the calendar year, it will have to pay at least the $800 and file a tax return for the year. Given that the formation of the entity generally takes about 2 months from start to finish, if the Articles of Incorporation are filed on December 1, 2018, the entity will not be ready to begin business until normally mid-January or later. So, the brand new entity would have to pay the $800 tax for 2018 but won’t get the benefit of doing any business in 2018! That’s not a great outcome. However, pursuant to California Franchise Tax Board Publication 1060, corporations with a tax year of 15 days or less will not need file a tax return as long they do not conduct any business during those days. California’s 15-day rule allows you to incorporate or form an LLC during the last 15 days of the year and avoid filing tax returns in that year. Consider incorporating between December 17 and December 31 to get the entity up and running at the beginning of 2019 without having to file returns or pay annual fees.