Whether you are a new business owner or an established one, starting an S Corp in California and understanding the tax process is essential for minimizing your taxes and maximizing profits. California does not use a flat tax rate like many other states. Instead, it uses a progressive income tax system. This means that businesses of all sizes can benefit from filing as an S Corporation, as the tax rate varies depending on the amount of taxable income.
In this guide, we’ll explain the S Corp taxation requirements and processes in California, including how to file for an election to become an S Corporation, and the different forms you’ll need for filing your business taxes.
How are S Corps taxed?
S Corporations are pass-through entities, meaning the corporate income is “passed through” to the shareholders. The business itself doesn’t pay taxes on its income, only the shareholders. Instead of paying corporate tax, shareholders pay individual or personal taxes based on their own tax bracket. In California, S Corporations are subject to the state’s personal income tax rates, which range from 1% to 13.3%. Additionally, in most cases, S Corps are also required to pay an annual $800 minimum franchise tax.
How do I file my taxes as an S Corp?
In order to file your taxes as an S Corporation, you must first make an election to the IRS to become an S Corp. This can be done by filing a Form 2553 with the IRS. Additionally, you will need to file California’s Statement of Information (Form SI-100) with the California Secretary of State to register your business within the state.
Once you have completed these forms, you will need to file an income tax return with the state of California. The form used to file your taxes as an S Corporation is Form 100S, or the California S Corporation Franchise or Income Tax Return. This form must be submitted along with federal Form 1120S, U.S. Income Tax Return for an S Corporation. Additionally, you will need to file an annual Statement of Information (Form SI-200) with the California Secretary of State to comply with state regulations.
What are the deadlines for filing my taxes?
The deadline for filing your S Corporation tax return is the 15th day of the 3rd month following the end of your tax year. For example, if your fiscal year ends on December 31st, your tax return is due by March 15th. Additionally, the annual Statement of Information (Form SI-200) must be filed with the state of California by the 15th day of the 4th month after the beginning of your tax year.
Who can help me with starting an S Corp in California?
David York’s Tax Service can help clients with S Corps file their taxes and other assistance in a broad range of areas. We provide comprehensive services for the filing process that covers all aspects, from preparing the necessary forms to filing with applicable federal and state agencies.
Our team of qualified professionals can help you discover the advantages of being an S Corp owner, answer questions such as the difference between S and C Corps, and help clients determine their S Corp compensation. Additionally, we offer a variety of services in California to ensure that your returns are in compliance with all applicable laws and regulations.