Yes, you can offset the losses against prior years. The normal rule is that you can carryback the loss two years, and carry forward 20 years. But recent changes allow you to carryback 5 years.
However, the rules are a bit more complicated for an LLC (assuming that the LLC did not elect to be treated as a C corp). The NOL is carried over to the individual's tax return.
If the LLC is a "disregarded entity" for tax purposes (i.e., you own it as either a single individual, or you elected out of partnership treatment and included the results on Schedule C or E, you'd have to combine its results with your other income and deductions to see if you have a Net Operating Loss.
Similarly, if the LLC files as a partnership (form 1065) ? the default method when there is more than one owner ? or files as an S corporation (Form 1120S, its results flow to your personal return as well.
In any of these circumstances, you need to be certain that you have sufficient "basis" to claim the loss. for example, if the loss was funded with LLC-owed bank loans or credit cards, rather than money you yourself put into the company, the amount of loss you can include on your personal returns could be limited.
Assuming you can deduct the loss, and your taxable income for the year is less than zero, you should see if you in fact have a net operating loss. You can carry the loss back to any year (your choice) between
2004 and 2007 (provided you didn't have a similar NOL in 2008 that you carried back to a year earlier than 2006). If the loss is not completely absorbed in the initial carry back year, it is carried over year-by-year until fully absorbed. You also have the choice to forego the carry back and carry the loss to future years only. Form 1045 can be used for a quick refund. You'll also need to amend your CA tax returns for the same years.
If the LLC had elected to be taxed as a corporation, but did not make the S election, it's the corporation that makes the carry back/carry over choice.
You would not be able to get a refund of the CA LLC franchise tax based on gross receipts, if the LLC is subject to that tax.
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