To file for an S Corp in California, you form a standard corporation with the California Secretary of State, obtain a federal Employer Identification Number, and then file IRS Form 2553 to elect S corporation treatment. California recognizes the federal election automatically, so there is no separate state election form. The state still taxes S corporations, though: an $800 annual minimum franchise tax and a 1.5% tax on California net income, whichever is greater.
The sequence matters, and so does the timing. A late Form 2553 can push your election back a full year unless you qualify for relief.
Confirm Your Corporation Is Eligible
Before spending money on formation, check that the business can actually hold S status. The IRS limits the S election to domestic corporations that meet all of these tests:1Internal Revenue Service. S Corporations
- No more than 100 shareholders.
- Shareholders must be individuals, certain trusts, or estates. Partnerships, other corporations, and nonresident aliens are not allowed.
- Only one class of stock. Voting-rights differences alone do not create a second class.
An LLC taxed as a corporation can also make the S election, but forming a standard California corporation is the most direct route.
File Articles of Incorporation With the Secretary of State
The Articles of Incorporation establish your corporation as a legal entity. The document includes the corporate name, principal office address, registered agent’s name and address, and the number of authorized shares. The filing fee is $100.2California Secretary of State. Business Entities Fee Schedule
You can file through the Secretary of State’s bizfile Online portal, by mail, or in person in Sacramento. Online filings tend to process fastest. If you need a guaranteed turnaround, two expedited tiers exist: 24-hour processing for $350 and same-day processing for $750, with same-day documents required by 9:30 a.m.3California Secretary of State. Service Options – Business Entities
Your corporate name must be distinguishable from names already on file with the Secretary of State. Search the bizfile records before you commit to one.
Registered Agent
Every California corporation must designate an agent for service of process, meaning the person or entity that receives legal documents for the corporation. The agent must be either a California resident or a corporation authorized under Corporations Code Section 1505 to act as an agent. If the agent is an individual, list a complete street address, not a P.O. Box.4California Legislative Information. California Corporations Code 1502
Professional registered agent services typically charge $35 to $400 per year and keep your personal address off public records.
Bylaws and Organizational Meeting
Bylaws are your corporation’s internal rules, covering how directors are elected, when meetings are held, and how votes are counted. You do not file them with the state, but you should adopt them at the first organizational meeting. At that same meeting, directors typically appoint officers, authorize the initial issuance of stock, and adopt banking resolutions. These records anchor the corporate formalities you will need to maintain going forward.
File the Initial Statement of Information
Within 90 days of incorporating, file a Statement of Information (Form SI-550) with the Secretary of State, listing the corporation’s officers, directors, registered agent, and principal business address. The fee is $25, and you can file online through bizfile.5California Secretary of State. Statements of Information Filing Tips
Missing this filing is one of the quickest ways to lose good standing. The Franchise Tax Board can impose penalties, and the Secretary of State can move to suspend or forfeit your corporation, which strips your ability to conduct business or use California courts. You must repeat the filing every year afterward.
Get an EIN From the IRS
Your corporation needs a federal Employer Identification Number before you elect S status. Apply for free on the IRS website; online applications produce the number immediately. The EIN goes on Form 2553 and every tax return the corporation files. If you already have an EIN from operating as a C corporation, you keep the same one when you elect S status.6Internal Revenue Service. When to Get a New EIN
File Form 2553 to Elect S Status
With the corporation formed and an EIN issued, elect S corporation treatment by filing IRS Form 2553, “Election by a Small Business Corporation.” Every shareholder must sign to consent to the election.7Internal Revenue Service. About Form 2553, Election by a Small Business Corporation
The Deadline
To have the election apply to a given tax year, file Form 2553 no later than two months and 15 days after the start of that tax year, or at any point during the preceding tax year. For a calendar-year corporation, that means March 15 for the current year, or anytime the year before.8Office of the Law Revision Counsel. 26 USC 1362 – Election; Revocation; Termination
File after March 15 and the election waits until the following tax year. New corporations get a small break: the two-month-and-15-day clock runs from the date of incorporation, not from January 1.9Internal Revenue Service. Instructions for Form 2553
How to Submit
Form 2553 cannot be e-filed. Mail the original to the IRS service center in Ogden, UT 84201, or fax it to 855-214-7520. If you fax, keep the original in your corporate records.10Internal Revenue Service. Where to File Your Taxes for Form 2553
The IRS usually sends an acceptance letter (CP261) within 60 days. If nothing arrives, follow up. Operating as an S corporation without confirmation and later discovering a filing problem creates a messy retroactive fix.
If You Missed the Deadline
A late Form 2553 does not automatically cost you the year. Revenue Procedure 2013-30 provides late election relief, with a standard window of three years and 75 days from the date the election was supposed to take effect.11Internal Revenue Service. Late Election Relief
To qualify, you need reasonable cause for filing late, the corporation must have been eligible for S status the whole time, and the corporation and shareholders must have reported income consistent with S treatment since the intended effective date. Write “FILED PURSUANT TO REV. PROC. 2013-30” at the top of Form 2553 and attach a signed statement explaining the delay.
Past three years and 75 days, a separate “no time limit” path exists, but only if the IRS never questioned the S status and at least six months have passed since the first S corporation return. Every shareholder from the intended effective date onward must provide a statement confirming they reported income as if the election were in place.12Internal Revenue Service. Revenue Procedure 2013-30
What California Will Tax
California does not require a separate S election. Once the IRS accepts Form 2553, the state honors it automatically. The taxes are another matter.
$800 Minimum Franchise Tax
Every corporation incorporated or doing business in California owes an annual minimum franchise tax of $800, regardless of income.13California Legislative Information. California Revenue and Taxation Code 23153 Newly incorporated or newly qualified corporations are exempt from the minimum for their first taxable year.14Franchise Tax Board. Corporations
Skip the payment and the Franchise Tax Board can suspend the corporation, which cuts off its right to do business in California or to file and defend lawsuits in state court.
1.5% Tax on Net Income
On top of the $800 minimum, California imposes a 1.5% tax on an S corporation’s net income sourced to the state. You pay whichever is greater. On $200,000 of California net income, the state tax is $3,000, not $800.15Franchise Tax Board. S Corporations
This is an entity-level tax, which is unusual. Most states with an income tax simply pass S corporation income through to shareholders without any corporate-level charge. California’s 1.5% reduces the tax savings of the S election compared with other states.
Form 100S and Estimated Payments
California S corporations file Form 100S. The original deadline is the 15th day of the third month after the tax year closes, so March 15 for calendar-year corporations. An automatic six-month extension pushes the filing deadline to September 15, but any tax owed is still due March 15.16Franchise Tax Board. Instructions for Form 100S – S Corporation Tax Booklet
If you expect to owe more than $800 for the year, quarterly estimated tax payments are required on an unusual schedule: 30% by the 15th of the fourth month, 40% by the sixth month, nothing in the ninth month, and the final 30% by the 12th month. For calendar-year filers, that is April 15, June 15, and December 15.17Franchise Tax Board. Instructions for Form 100-ES Corporation Estimated Tax Underpayments trigger a penalty running from the missed due date until you pay.
Keep the Election Alive
The S election survives only as long as the corporation keeps up with both state and federal obligations.
- File Form SI-550 with the Secretary of State every year, updating officers, directors, and registered agent information. The fee is $25.
- Pay the annual franchise tax (the greater of $800 or 1.5% of net income) to the Franchise Tax Board after the first-year exemption.
- File federal Form 1120-S and issue a Schedule K-1 to each shareholder.
- File California Form 100S.
- Run payroll for owner-employees at reasonable compensation, withhold and remit employment taxes, and file quarterly payroll returns.
- Hold annual shareholder meetings, keep minutes, and maintain a stock ledger. Neglecting these formalities weakens liability protection if someone later argues the corporation is a shell.
Reasonable Salary for Owner-Employees
A core tax benefit of the S corporation is that distributions to owner-shareholders are not subject to Social Security and Medicare taxes. Wages carry the full 15.3% FICA rate, which is 12.4% for Social Security on earnings up to the $176,100 wage base in 2026 plus 2.9% for Medicare on all earnings. Distributions do not.
The IRS treats this as an audit priority. If it decides an owner’s salary is unreasonably low, it can reclassify distributions as wages and assess back payroll taxes, interest, and accuracy-related penalties of 20% to 40%. The trust fund recovery penalty can extend personal liability to the owner for the unpaid employee share of FICA.
There is no set formula for reasonable compensation. It turns on the owner’s training and experience, actual duties, hours worked, pay for comparable positions in the same geographic area, and the corporation’s profitability. Pull comparable salary data from the Bureau of Labor Statistics or similar sources and keep the research in your corporate records.
How the Election Can End
Shareholders owning more than 50% of the stock can voluntarily revoke the S election. It can also terminate automatically if the corporation stops meeting the eligibility rules, for example by admitting an ineligible shareholder or issuing a second class of stock. Once terminated, the corporation generally cannot re-elect S status for five years without IRS consent.1Internal Revenue Service. S Corporations
One narrower risk applies only if you converted from a C corporation with accumulated earnings and profits: passive investment income exceeding 25% of gross receipts for three consecutive years terminates the S election automatically, and the excess is taxed at 21% at the corporate level in the meantime.8Office of the Law Revision Counsel. 26 USC 1362 – Election; Revocation; Termination A corporation that was an S corporation from day one has no C corporation earnings and profits, so this rule does not apply.