C corporations

Generally, a C corporation pays taxes annually, on their earnings, under the guidelines of the Internal Revenue Code, unless it decides to be taxed as an S corporation.

We tax the shareholders of a C corporation separately from the business. This tax is based on the earnings when distributed as dividends.

Some key features of a C corporation are:

  • A corporation must create bylaws (e.g., how the corporation will operate) that cover items such as:
    • Stockholder meetings
    • Director meetings
    • Number of officers and their responsibilities
  • A corporation must register with the California Secretary of State before conducting business operations and file appropriate paperwork
  • The owners have ultimate control of the corporation but:
    • Must elect directors who then elect officers for the company
    • The directors make the major decisions, while the officers make the day-to-day decisions
  • If formed as a corporation:
    • The owners of the corporation are not liable for the losses of the businesses
    • Creditors generally may only look to the corporation and the business assets for payment

Filing requirements

You must file California Corporation Franchise or Income Tax Return (Form 100) if the corporation is:

  • Incorporated in California
  • Doing business in California
  • Registered to do business in California with the Secretary of State
  • Receives California source income

You should use the below guidelines to file your state income taxes:

  • The California income tax rate for C corporations, other than banks and financial institutions, is 8.84%. Visit our tax rates table for complete list of tax rates
  • Your minimum franchise tax ($800) is due the first quarter of each accounting period
    • You must pay the tax whether your corporation is active, inactive, operates at a loss, or files a return for a short period (less than 12 months)
    • Newly incorporated or qualified corporations are not required to pay the minimum franchise tax in their first year

      C corporations are not subject to the franchise tax for a tax year if both of the following is true:

      • Tax year is 15 days or less
      • They did not conduct any business in California during the 15 days
    • Any first-year net income is still subject to the 8.84% tax rate
  • If you have income or loss inside and outside California, use Apportionment and Allocation of Income (Schedule R) to determine income subject to tax in California
  • Your return due date is the 15th day of the 4th month after the close of your taxable year

Every corporation that is incorporated, registered, or doing business in California must pay the $800 minimum franchise tax.

Withholding on California source income

Visit our Resident and Nonresident Withholding Guidelines (FTB 1017).