Running a corporation in California involves more than just managing operations—it also means staying on top of state and federal tax obligations. With one of the highest corporate tax rates in the country and complex compliance rules, California businesses must plan wisely. This guide will help Los Angeles-area corporations understand what’s required and how to stay compliant.
Overview of Corporate Taxes in California
Corporate taxes are levied at both the federal and state levels. California imposes several types of taxes on corporations.
Types of Corporate Entities
- C Corporations: Subject to double taxation—once at the corporate level and again on shareholder dividends.
- S Corporations: Pass-through entities that allow profits and losses to be reported on shareholders’ individual tax returns.
California Corporate Tax Rates
- C Corporations: Subject to an 8.84% state income tax.
- S Corporations: Pay a 1.5% franchise tax on net income, with shareholders taxed individually.
Franchise Tax and Minimum Requirements
All corporations in California must pay an annual minimum franchise tax of $800, even if the business does not generate income.
When the Minimum Tax Applies
- Applies the first year for C Corporations
- Applies after the first year for S Corporations
- Exceptions may apply for newly registered corporations under certain startup provisions
Filing Requirements and Deadlines
Missing a corporate tax deadline can result in penalties and interest.
Important Tax Filing Deadlines
- C Corporations: File Form 100 by the 15th day of the 4th month after fiscal year-end
- S Corporations: File Form 100S on the same timeline
- Federal returns are typically due on April 15 (or the 15th day of the 3rd month for corporations)
Deductions and Credits
California offers limited deductions and credits compared to federal law, but some valuable options are available.
Common Business Tax Credits
- Research & Development Credit
- California Competes Tax Credit
- New Employment Credit (NEC)
These can reduce your tax liability, but require careful documentation and legal compliance.
Why Legal Guidance is Critical
Corporate tax planning and compliance can be complex, especially for growing businesses.
Legal Support for Tax Strategy
An experienced California tax attorney can:
- Help structure your business to minimize tax liability
- Ensure compliance with state and federal tax laws
- Assist in audits or disputes with the California Franchise Tax Board (FTB)
Understanding and managing corporate taxes is essential for your business’s success in California. Don’t let tax complexities threaten your growth. Contact Law Advocate Group, LLP in Beverly Hills for comprehensive legal support in corporate tax planning and compliance.
