CALIFORNIA

Why Form a Corporation in California?


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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

  1. Fees for forming a corporation in California: Learn about standard filing costs here for CA corporations.

  2. California Statement of Information Report Fee: A yearly fee when you file your Annual Report.

  3. California Franchise Tax Fee: A yearly fee when you file your annual franchise tax report.

  4. California Permits and Licenses: 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.

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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

IRS Payroll Tax

Your California corporation will need to pay employer payroll tax to the IRS on salaries paid to employees.

California State Income Tax

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.

Sales and Use Tax Payable to the State of California

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 in California

Franchise tax is payable on corporation business earnings. The minimum fee is $800, but could be higher depending on business profits.

Other Taxes in California

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.

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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 Incfile

California 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.

Start Your S Corp with Incfile     Start Your C Corp with Incfile

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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
$100 15 Business Days 5 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

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