A step-by-step guide shows you how to start an S corp in California. File Form 2553 to Elect California S Corp Tax Designation. To form a California S corporation requires forming a C corporation and then electing with the IRS to be taxed subject to Subchapter S of the Internal Revenue Code, which makes you an S corporation. The S election exempts the corporation from federal taxation directly on its net income and flows profit or loss untaxed to shareholders. You can start an S corporation by either creating a limited liability company or just forming a corporation. With Inc Authority, you only have to fill out a short form to apply for it.
Costs of Forming an S Corporation
The cost to form an S corporation in California varies depending on the services you use. The basic filing fee to form an S corporation with the California Secretary of State is $70. Your corporation will also be responsible for an annual tax of $800 to the California Franchise Tax Board. The two common fee structures that corporate lawyers use are hourly and flat. Often, something as simple as an email response will incur a fee. We recommend using a professional formation service to get your S corp up and running in no time.
Considerations Before Forming an S Corp
Before forming an S corp, you have to consider: Is an S corporation the best strategy for your business? Form an S Corp in California in 7 steps to avoid double taxation on corporate income. Most California small business owners want to save on operating costs wherever possible. By starting an S corp in California, you can reduce federal taxes.
How much does it cost to open an S Corp in California?
To create an S-Corp in California, deciding the name for your corporation is significant. An S corporation is a tax designation that reduces self-employment tax. The next step entails electing S corp status from the IRS.
Do you have to pay the $800 California S Corp fee every year?
Yes, your corporation will be responsible for an annual tax of $800 to the California Franchise Tax Board.