California S Corporation Formation Guide
Complete step-by-step guide to forming your S Corporation in California. Learn requirements, timelines, and expert tips for a successful formation.
7 Steps to Form Your California S Corporation
Choose Your Corporation Name
Your California corporation name must be unique and follow state naming requirements.
Name Requirements:
- ✓ Must be distinguishable from existing corporations on record
- ✓ Cannot mislead the public about entity type
- ✓ Cannot use "Professional Corporation," "Prof Corp," "P.C." or "PC" unless properly licensed
- ✓ Cannot suggest it's an insurer unless properly licensed
Pro Tip: Reserve your name for 60 days for $10 through bizfileOnline.sos.ca.gov before filing your Articles of Incorporation.
Appoint a Registered Agent
California requires every corporation to designate an agent for service of process.
Agent Qualifications:
- ✓ Individual who resides in California, OR
- ✓ Registered corporate agent with current 1505 Application on file
- ✓ Must be available during business hours
- ✓ Must have California street address (no P.O. boxes)
Consider a Professional Service: Many business owners choose professional registered agent services for privacy and reliability. Services start around $49/year.
File Articles of Incorporation
File Articles of Incorporation with the California Secretary of State along with the $100 filing fee.
Required Information:
- ✓ Corporation name and purpose
- ✓ Registered agent name and address
- ✓ Number of shares authorized
- ✓ Incorporator information
Processing: The corporation's existence begins when the Secretary of State endorses the Articles of Incorporation. You'll receive an uncertified copy at no charge with filing fees of $25 or more.
Create Corporate Bylaws
Establish internal rules and procedures for your corporation's governance and operations.
Bylaws Should Include:
- ✓ Board of directors structure and responsibilities
- ✓ Shareholder voting procedures
- ✓ Meeting requirements and procedures
- ✓ Officer roles and responsibilities
Obtain an EIN (Federal Tax ID)
Get an Employer Identification Number from the IRS for tax purposes and banking.
- ✓ Free to obtain directly from the IRS
- ✓ Required for business bank accounts
- ✓ Needed for S Corp election and tax filings
- ✓ Required for hiring employees
File Form 2553 for S Corp Election
File Form 2553 "Election by a Small Business Corporation" with the IRS to elect S Corporation status.
Key Requirements:
- ✓ Must be filed within 2 months and 15 days of tax year start
- ✓ No more than 100 shareholders allowed
- ✓ Only allowable shareholders (individuals, certain trusts, estates)
- ✓ No nonresident alien shareholders
- ✓ Only one class of stock allowed
Important: When a corporation elects federal S corporation status, it automatically becomes an S corporation for California tax purposes.
File Statement of Information
California stock corporations must file their Statement of Information yearly in the month of registration.
Filing Requirements:
- ✓ $25 filing fee ($20 filing + $5 disclosure fee)
- ✓ Must be filed annually in registration month
- ✓ $250 penalty if not filed on time
- ✓ File when agent information changes
Important: The Franchise Tax Board collects the $250 penalty on behalf of the Secretary of State if you fail to file your Statement of Information on time.
California S Corporation Tax Requirements
California State Taxes
- • Tax Rate: 1.5% of net income or $800 minimum franchise tax (whichever is greater)
- • First Year Exemption: Newly incorporated corporations are exempt from minimum franchise tax for their first year
- • Filing: Must file Form 100S annually by the 15th day of the 3rd month after tax year end
- • Estimated Payments: All corporations must make estimated tax payments
Federal Requirements
- • Annual Return: File Form 1120-S annually
- • Schedule K-1: Provide to all shareholders annually
- • Pass-through Taxation: Income/losses pass through to shareholders
- • Employment Taxes: Required for shareholder-employees
Additional Requirements & Considerations
Business Licenses
Depending on your business type and location, you may need additional licenses and permits.
- • City/county business license
- • Professional licenses (if applicable)
- • Industry-specific permits
Ongoing Compliance
Maintain good standing by meeting all ongoing requirements and deadlines.
- • Annual franchise tax payment
- • Annual Statement of Information
- • Registered agent maintenance
- • Corporate record keeping
Need Help Forming Your California S Corporation?
Professional formation services can handle the entire process for you, ensuring accuracy and compliance. Compare top-rated services and find the best option for your business.