S corporations Business type

An S corporation is a corporation that elects to be taxed as a pass-through entity. Income, losses, deductions, and credits flow through to the shareholders, partners or members. They then report these items on their personal tax return. IRS approval is required for the S election status.

Some key features of S corporations are:

  • They do not pay federal income taxes
  • They’re limited by the types of owners (shareholders) and cannot exceed 100 shareholders
  • A separate bank account and separate records are required with this form of business
  • S corporations are subject to the annual $800 minimum franchise tax

Filing requirements

You must file California S Corporation Franchise or Income Tax Return (Form 100S) 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:

  • We tax every S corporation that has California source income 1.5%. 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)
    • We waive the minimum tax on newly formed or qualified S corporations filing an initial return for their first taxable year if both of the following are true:
      • They did not conduct any business in California during the tax year
      • Their tax year was 15 days or fewer
    • Any first-year net income is still subject to the 1.5% 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).