California Corporation Taxes and Fees
You’ll need to pay certain taxes and fees for your California S Corp or C Corp. We’ve included the more common ones below.
Common Fees for a California Corporation
Learn about standard filing costs here for CA corporations.
A yearly fee when you file your Annual Report
A yearly fee when you file your annual franchise tax report.
These are the fees for creating or renewing your licenses and permits on a regular basis. These depend on the type of California corporation you’re operating and where you’re located.
Taxes You and Your California Corporation Need to Pay
California S Corporations and C Corporations are taxed differently. Find the details below.
Both S Corporations and C Corporations in California Need to Pay These Taxes
Your California corporation will need to pay employer payroll tax to the IRS on salaries paid to employees.
Anyone who takes earnings out of your California corporation will need to pay California state income tax. Find out more on the California Tax Service Center website.
If your CA corporation is selling products or services in California, you may need to pay a state sales tax. Find out more on the California Tax Service Center website.
Franchise tax is payable on corporation business earnings. The minimum fee is $800, but could be higher depending on business profits.
You may need to pay other taxes and fees depending on the type of California corporation you run. Find out more on the California Tax Service Center website.
Estimated Taxes for Your California Corporation
Most California corporations will need to pay estimated taxes throughout the year, depending on the amount of income and profit you expect to make. The most common types of estimated tax are:
- Federal income tax
- Federal self-employment tax
- California state tax
Most California S Corporations and C Corporations will pay estimated taxes four times a year. Speak to your accountant for more information.
California Corporation Employee Taxes and Insurance
If your CA corporation employs workers, you will need to pay insurance and taxes to the state for each employee.
Get more requirements from the California Labor and Workforce Development Agency website.
Taxes Payable by All Individuals Working for California Corporations
Pay Federal Income Tax on California Corporation Earnings, Dividends and Distributions.
You will need to pay regular federal income tax when you file your tax return every year.
California S Corporations — Additional Tax Liabilities
Self-Employment Tax
In a California S Corporation, your earnings “flow through” from the business to your personal tax return. This means you must pay self-employment tax on those earnings at a rate of 15.3 percent. Note that you can deduct standard tax deductions and business expenses.
You will be able to deduct your business expenses from your income when working out how much self-employment tax you owe. Here are some examples of how much self-employment tax you may need to pay, depending on your earnings:
- On profits of $40,000, you would pay self-employment tax of $6,120
- On profits of $90,000, you would pay self-employment tax of $13,770
- On profits of $140,000, you would pay self-employment tax of $21,420
- On profits of $160,000, you would pay self-employment tax of $24,480
In some cases, part of the income from an S Corporation can be paid as a “distribution” rather than “salary,” so it would not be subject to self-employment tax.
File Your California S-Corp Tax Election with IncfileCalifornia C Corporations — Additional Tax Liabilities
Corporation Tax
Unlike the the Limited Liability Company and the S Corporation, a California C Corporation is required to file a corporate tax return and pay corporation taxes on any profits. When those taxed profits are paid to shareholders as dividends, they will also be subject to taxation on that individual’s tax return. This is known as “double taxation.”
Stock Dividends From C Corporations
A California C Corporation may pay shareholders dividends as a share of the profits of the company. The value of dividends that each shareholder is entitled to depends on how many shares they own.
Dividends that are distributed to shareholders are taxed twice: first at the corporate level as profit (on the corporation’s Form 1120) and again at the individual level as stock dividends (on the shareholder's Form 1040).
Ready to Start Your California Corporation?
Incfile provides a cost-effective service to help you create your California corporation. We guide you through the process and handle most of the administrative steps, such as filing the necessary forms on your behalf.
Our basic package also provides a free Registered Agent service for the first year. If you're looking for help starting an S Corporation or C Corporation, our comprehensive services provide outstanding value.
