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  1. #1
    Join Date
    Nov 2016
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    26

    Default Does an S Corporation Pay an Annual Fee to the State

    My question involves business law in the state of: CALIFORNIA

    I understand that there is an $800 annual fee if you have an LLC in CA.

    What about S-Corps?

    Do I need to file under CA or can I file in other States? This business will have one member or S/H. Just starting, so very little revenue. If i can is it worth filing out of state? Getting bank accounts, any other hassles?

    Thank you.

  2. #2
    Join Date
    Sep 2010
    Posts
    19,668

    Default Re: Does a S Corporation Pay an Annual Fee to the State

    All Corporations and LLCs pay the $800 franchise tax.

    There's no such entity as an S corp. You have LLCs and you have corporations. Either one can elect tax treatment as an S corporation.

    A foreign (meaning out of state) corporation that does buisiness in California is still subject to the franchise tax.

    If you don't think you're going to do enough business, I might suggest you just register a fictitious name (also known as a T/A or D/B/A) for yourself with the state and operate it as a sole proprietorship. If things get going better, you can always create the LLC/Corporation. Note that you don't get a whole lot of liability protection if you're a one-man operation even if you have a corporation.

  3. #3
    Join Date
    Oct 2014
    Posts
    7,931

    Default Re: Does an S Corporation Pay an Annual Fee to the State

    Quote Quoting weedkill3
    View Post
    My question involves business law in the state of: CALIFORNIA

    I understand that there is an $800 annual fee if you have an LLC in CA.

    What about S-Corps?
    LLCs, S-corporations, and C-corporations all must pay the annual franchise tax, which is a minimum of $800. The California Franchise Tax Board (FTB) explains that here: summary of California rules for S-corporations.

    Quote Quoting weedkill3
    View Post
    Do I need to file under CA or can I file in other States? This business will have one member or S/H. Just starting, so very little revenue. If i can is it worth filing out of state?
    I’m not sure whether you are referring to filing tax returns or filing to set up the LLC/corporation. If a corporation or LLC derives income from California then it (and possibly the owners as well) will need to file and pay income tax there and may be subject to other taxes in that state too, depending on the details of the business.

    A corporation (whether S-corp or C-corp) or LLC that is created or organized in California must pay the franchise tax. A corporation or LLC that is created and organized in some place outside California but that does business within California must register in the state as a foreign LLC. Foreign corporations and LLCs in the state must also pay the $800 franchise tax. Most other states have similar rules. As a result, it is rarely worthwhile for a small, closely held businesses to organize in some state in which it does not do business because by doing that they subject themselves to additional fees and taxes in the state where they organize and they still also have to pay the taxes and fees in every state where they do business, too.

    Sole proprietors operating in California are subject to income tax in that state but not the franchise tax. Sole proprietors do not, however, get the benefit of limited liability protection that corporations and LLCs provide. For most small businesses owned by one person and that has no employees the benefit of the limited liability protection is, well, pretty limited. No matter how the business is organized you are always liable to others for the harm you cause through your own negligence. And most lenders (including suppliers that extend lines of credit) as well as landlords, etc, of a small LLC or corporation will have the owner(s) execute personal guarantees of the debt of the business entity.

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