​What Is an S-Corp?

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An S-Corp is not a type of business entity—it’s a tax election made by an LLC or C Corporation that allows profits to pass through to the owners without being federally taxed at the corporate level. This structure can significantly reduce self-employment taxes by splitting income into:

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• Reasonable salary (subject to payroll taxes)

• Owner distributions (not subject to payroll taxes)

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Watch Out for California-Specific S-Corp Rules

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While the federal tax benefits are compelling, California adds its own layer of complexity:

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• California applies corporate-level taxes of $800 in minimum franchise tax (due annually, even in low-profit years) or 1.5% of S-Corp net income, whichever is greater​

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• Form 100S must be filed annually with the Franchise Tax Board

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Who Benefits Most from an S-Corp?

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S-Corp status isn’t for everyone. The best candidates typically:

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✅ Earn $100K+ in net income
✅ Have predictable earnings
✅ Don’t need to reinvest all profits back into the business

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If your business is just starting out, an S-Corp may not be the best fit.

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Avoiding Common Mistakes

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Many California S-Corp owners run into trouble by:

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• Setting an unreasonable salary (too low = audit risk, too high = lost savings)

• Mixing personal and business finances

• Missing filing deadlines or failing to pay the franchise tax

• Not properly setting up payroll and paying applicable payroll taxes

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Steve CPA helps you avoid these traps with clean bookkeeping, compliance support, and strategic reasonable compensation planning.

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Let’s Find Out If It’s Worth It—for You

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Every business is different. That’s why Steve CPA offers a personalized S-Corp analysis to help you:

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• Estimate your potential tax savings

• Understand setup and compliance costs

• Evaluate whether the timing is right

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📞 Ready to explore your options?​

 

Contact Steve CPA today for a personalized S-Corp evaluation.