S Corp California: Everything You Need to Know
An S corporation California isn't an actual corporation but a tax status. 4 min read
2. How to Form a Corporation in California
3. Hiring an Agent to Form Your Corporation
4. Forming a California S Corporation?
5. California Tax Treatment of S Corporations
Updated July 10, 2020:
S Corporation California
An S corporation California isn't an actual corporation but a tax status. Any corporation can elect to be taxed as an S corporation after forming. The rules that govern LLCs and for-profit companies are the same rules that govern an S corporation in California.
How to Form a Corporation in California
To form an S corporation California, you'll need to first establish your business name. Choose a unique name that is not listed within the records of the California Secretary of State. You cannot select a name that is already in use or a name that's very much like another. You may need to choose a name that includes:
You also have the option simply to add the abbreviation to your business name.
The next portion of forming your corporation must be done by mail and cannot be completed online. Mail a Name Availability Inquiry Letter to check the availability of your name. This is a free service that the California Secretary of State's office performs. In the event that your business name is available, you can reserve it for 60 days. File a Name Reservation Request Form to the same office.
For the form to be accepted, send it by mail or in person along with the $10 fee. To form your corporation, the Articles of Incorporation must be filed with the California Secretary of State. The details of this filing include:
- The name of your business
- Its purpose
- The name of an agent
- A non-P.O. box address of the agent.
You'll also need to include the number of shares the corporation has authorized. The Articles of Incorporation you file must include your business street address and the mailing address.
Hiring an Agent to Form Your Corporation
File the articles in person or by mail with the $100 filing fee included. Since your corporation is in California, you are required to have an agent for service process located in the state. The agent may be a corporation or individual. This agent will accept legal documentation in the event you are sued. The agent must agree to accept service of process on behalf of your corporation.
Your corporation cannot serve as its own agent for service of process. The agent must agree to accept service of process before the designation. The agent can be a corporate agent who has already filed a certificate pursuant to Section 1505 of the California Corporations Code.
This certificate is filed with the Secretary of State. The agent can also be an individual who simply lives in California. The agent is required to have a physical street address. When selecting an initial agent, most small corporations choose an officer or director of the company.
Forming a California S Corporation?
An S corporation is not a type of corporation in itself; it is a tax status. Regular corporations, partnerships, and LLCs can file Form 8832 with the IRS to be taxed as an S corporation. This Form is an Entity Classification Election. The rules that govern the formation of an LLC or Limited Liability Company or any for-profit corporation are the same. After the formation of the corporation, the election to be treated as an S corporation is filed with the IRS.
A California S-Corp is also known as a CA S-Corp. When choosing the name for your California S-Corp, be sure the name is available. The name itself must indicate the status of corporation by including “Inc.” or “Incorporated” as a suffix. You'll have to file a document or charter referred to as Articles of Incorporation or AOI, detailing the main information or rules of the corporation.
California Tax Treatment of S Corporations
A major leverage point of an S corporation is that federal income tax applies to the shareholder's returns rather than taxing the corporation — this entity is treated as a pass-through. All S corporations doing business in California or sourcing their income from California are required to file an Income Tax Return or California S Corporation Franchise, also known as Form 100S, by the 15th day of the third month following the close of the corporation's tax year. All S corporations that do business in California or that are incorporated in California must pay an $800 franchise tax.
Note that if a corporation has more than one class of shares, the corporation cannot elect to be an S corporation. Your Articles of Incorporation are restricted to one class of stock. There are further restrictions on the shareholder type and the number of shareholders.
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