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CALIFORNIA

Why Form a corporation in California.


$49 + State Fee & 1st Year FREE Registered Agent

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Taxes and Fees for Your California Corporation

Here’s a breakdown of the likely taxes and fees you’ll incur when you start and run a corporation in California.

California Corporation Fees

  1. California Corporation Formation and Filing Fee: A one-time fee of $100 when you first file your Articles of Incorporation.
  2. California State Annual Report Fee: A yearly fee of $25 when you file your annual report.
  3. California Permits and Licenses: Various fees for renewing your licensing and permit fees on a regular basis. These depend on the type of business you are operating and where you are located. They do vary from city to city and industry to industry. We have a service that will tell you what permits and licenses you need.

The way that S Corporations and C Corporations pay tax is different. We’ll take each one separately.

Taxes You and Your Corporation Need to Pay

Taxes Payable by All Corporations

  • Payroll Tax — Your corporation will need to pay employer payroll tax on salaries paid to employees
  • California State Income Tax — You will pay California state income tax on your earnings. Find out more here.
  • California State Sales/Use Tax — If you’re selling products or services in California, you may need to pay a state sales tax. You can register and pay state sales tax here.
  • California Other Taxes — You may need to pay other taxes and fees, depending on the type of business you run. Learn about other California taxes like the Franchise Tax and Annual Minimum Tax.

Taxes Payable by All Individuals Working for Corporations

  • Federal Income Tax on Earnings, Dividends and Distributions — You will also need to pay regular federal income tax when you file your tax return every year. You can see the federal tax brackets here.
  • Note that you will be able to apply your standard deduction, personal exemption and business expenses to this tax.

Taxes Payable by S Corporations

  • Self-employment Tax — Because your California corporation income flows through to your personal tax return, you must pay self-employment tax (also known as FICA, Social Security or Medicare tax) on your earnings. This is typically at a rate of 15.3 percent. You will be able to deduct your business expenses from your income when working out how much self-employment tax you owe.
  • 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. Find out how this can save you money.

Taxes Payable by C Corporations

  • Corporation Tax — Unlike the the Limited Liability Company and the S Corporation, a C Corporation is required to file a corporate tax return and pay corporation taxes on any profits.
  • When those taxes are paid to shareholders as dividends, they will also be subjected to taxation on that individual’s tax return. This is known as “double taxation.”

C Corporation Tax Rates

The income of the C Corporation is taxed at the corporate level and then again at the shareholder level.

Profit

Tax Rate

Up to $50,000

15%

$50,000-$75,000

25%

$75,000-$100,000

34%

$100,000-$335,000

39%

$335,000-$10,000,000

34%

$10,000,000-$15,000,000

35%

$15,000,000-$18,333,333

38%

More than $18,333,333

35%

Stock Dividends from C Corporations

A 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 Articles of Incorporation/Certificate of Formation on your behalf. Our basic package also provides a free Registered Agent service for the first year.

Only $49 + State Free To Launch Your Business

Clear Pricing. No Contracts. No Surprise.

What are the fees and requirements to form a business in California?

Filing Time and Price

The state charges this amount to file a new business entity. This fee goes directly to the Secretary of State.

State Fee State Filing Time Expedited Filing Time
$130 26 Business Days 16 Business Days

Compliance Requirements

This report is mandatory and must be filed within the specified time frame in order for the entity to remain in good standing with the state. Failure to file this report can lead to the company being revoked or administratively dissolved.

Statement of Information

Frequency: Biennially

Due Date: During six-month period ending on last day of anniversary month of incorporation or qualification.

Filing Fee: $20

Important:The initial Statement of Information filing is due within 90 days of the entity formation date.

 

California Franchise Tax

Frequency: Annually

Franchise Tax Fee: $800 (minimum)
$800 payment for the LLC Franchise Tax is due by 15th day of the 4th month after your LLC is filed. The month your LLC is filed counts as Month 1, regardless if you file on the 1st of the month, the last of the month, or any day of the month, really. This means that if you were to file your LLC on March 22nd, then you must pay the $800 fee no later than June 15th (in this example, March is Month 1, April is Month 2, May is Month 3, and June is Month 4). Then, every year after your first payment $800 LLC Franchise Tax will be due by April 15th. You pay the $800 LLC Franchise Tax using Form 3522 called the LLC Tax Voucher.
(We do not assist in the filing of the Franchise Tax Report)

Learn more about starting a business in California

Additional resources, guides, and articles for better decision making.

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EIN / Tax ID Number
Personalized Operating Agreement
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