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State Guide · California
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California S-Corp Conversion: The Extra Steps That Catch Most Business Owners Off Guard

California is the most complex state for S-Corp conversion — two separate elections, an $800 minimum franchise tax, and 1.5% state tax on net income. But the federal savings still outweigh the costs for most profitable businesses. Here is exactly what you need to file, when, and how to calculate whether it makes sense for you.

California FTB · Form 3560 Required · Updated May 2026 · 15 min read
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California S-Corp Filing Requirements

1
Federal — All States

IRS Form 2553 — Federal S-Corp Election

This is the standard federal S-Corp election filed with the IRS — the same process as every other state. You have two timing options: file within 75 days of forming your entity (retroactive to formation), or file by March 15 of the current year (effective for the full year). Late elections require a reasonable cause statement and IRS approval.

Filed with: Internal Revenue Service (IRS)
Cost: $0 — no filing fee
Deadline: 75 days from entity formation, or March 15 for current-year election
2
California Only — Do Not Skip

California Form 3560 — Separate State S-Corp Election

This is the step that catches most California business owners off guard. California does not automatically conform to the federal S-Corp election. Filing Form 2553 with the IRS makes you an S-Corp for federal tax purposes only. You must separately file Form 3560 (S-Corporation Election or Termination/Revocation) with the California Franchise Tax Board to receive S-Corp treatment at the state level.

If you skip Form 3560, California will continue to tax your business as a C-Corp or LLC — not as an S-Corp — until you file. There is no grace period, and the missed savings cannot be recovered retroactively without a successful late election petition.

Filed with: California Franchise Tax Board (FTB)
Cost: $0 — no filing fee
Deadline: 15th day of the 3rd month of the taxable year — March 15 for calendar-year businesses
Where to file: Attach to your California S-Corp return (Form 100S) or file separately with the FTB
3
Annual Obligation

$800 Minimum Franchise Tax — Paid Every Year, No Exceptions

Every California S-Corp owes the $800 minimum franchise tax annually — even if the business had zero revenue, operated at a loss, or was inactive. This is not a penalty. It is California's baseline cost of doing business in the state as an S-Corp.

The $800 minimum applies in year one, continues every year the entity exists, and is due regardless of profit. Even if your S-Corp election is effective for only part of the year, you owe the full $800 for that year. The only way to stop owing it is to formally dissolve the entity with the California Secretary of State and confirm the dissolution with the FTB.

Amount: $800 minimum — more if 1.5% of net income exceeds $800
Due date: 15th day of the 4th month of the taxable year (April 15 for calendar-year businesses)
Paid via: FTB Form 3539 (estimated) or with Form 100S annual return
4
California S-Corp Tax Rate

1.5% California S-Corp Tax on Net Income

In addition to the $800 minimum, California S-Corps pay 1.5% of net income as the California franchise tax. For most businesses, this means the $800 minimum applies until net income exceeds approximately $53,333 — after which the 1.5% rate results in a tax greater than $800.

This is notably different from the federal treatment, where S-Corp income passes through to shareholders with no entity-level tax. California imposes its own entity-level tax on S-Corps. This reduces, but does not eliminate, the overall tax advantage of S-Corp status in California.

Rate: 1.5% of California net income (minimum $800)
Example: $150,000 net income → $2,250 California S-Corp tax
Reported on: California Form 100S (S-Corp franchise tax return)
5
Registration

FTB Registration and California Form 100S Annual Return

California S-Corps must be registered with the California Franchise Tax Board and file an annual Form 100S (California S-Corporation Franchise or Income Tax Return). This return reports the S-Corp's income, calculates the 1.5% California tax, and issues Schedule K-1 equivalents to California shareholders for their personal California income tax returns.

If your LLC is converting to S-Corp status (rather than incorporating as a new corporation), confirm your entity type with the California Secretary of State is still recorded as an LLC — the S-Corp election is a tax classification overlay, not a structural change to the underlying entity.

Annual return: California Form 100S — due March 15 (calendar year) with extension to October 15
Estimated payments: Quarterly estimated tax payments to FTB required if liability exceeds $500
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California's $800 Minimum Tax — What You Need to Know Before You Elect

The $800 minimum franchise tax is not waived for new businesses, first-year S-Corps, or businesses that lose money. It is an unconditional annual obligation that begins the moment your California S-Corp election is effective.

Year 1 is not free. Some states waive first-year fees for new entities. California does not. Your first $800 minimum tax is due by the 15th day of the 4th month after your tax year begins. For a calendar-year business that elects S-Corp status effective January 1, the first $800 payment is due April 15 of that same year.

You owe it even if you dissolve mid-year. If you form a California S-Corp in January and dissolve in September, you owe the $800 for that year. The minimum tax is assessed for any year (or partial year) the entity is active in California.

What this means for your breakeven calculation: The $800 annual minimum tax raises the profit threshold at which S-Corp election makes financial sense. For businesses with net profit below approximately $40,000–$50,000, the combined cost of the $800 tax plus payroll compliance often exceeds the federal self-employment tax savings. Use the calculator below before deciding.

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The California Savings Math

Example: A California business owner with $150,000 net profit, taking a $75,000 reasonable salary. California personal income tax rate at this income level is approximately 9.3% on wage income and pass-through distributions.

As a California LLC
Net profit $150,000
Federal self-employment tax (15.3% on 92.35%) −$21,195
CA LLC gross receipts fee (income $250k–$500k) −$900
CA income tax on $150k pass-through (~9.3%) −$13,950
Total federal + CA tax burden $36,045
As a California S-Corp
Net profit $150,000
Reasonable salary $75,000
Federal SE/payroll tax on salary only (15.3%) −$11,475
CA S-Corp tax (1.5% × $150k net income) −$2,250
CA income tax on $150k pass-through (~9.3%) −$13,950
Total federal + CA tax burden $27,675
Estimated Annual Net Savings — California S-Corp vs. LLC
$8,370
At $150k profit with $75k reasonable salary. Does not include payroll service costs (~$500–$1,200/yr) or CPA fees. CA income tax rates vary — this uses 9.3% marginal rate.
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California S-Corp Savings Calculator

Estimate Your Net Savings After California Costs

Factors in the $800 minimum franchise tax, 1.5% CA S-Corp tax, and federal SE tax savings. Enter your numbers below.

Salary is 50% of profit — IRS typically expects 40–60%
Federal SE Tax Saved
$0
vs. LLC filing
CA S-Corp Tax + Min.
$0
1.5% CA tax (min. $800)
CA LLC Fee Avoided
$0
gross receipts fee you skip
Estimated Annual Net Savings
Before payroll service fees (~$500–$1,200/yr)
$0

This calculator provides estimates for educational purposes only. It does not account for California personal income tax (which applies to both LLC and S-Corp structures similarly), deductible payroll taxes, or your specific deduction profile. Payroll service fees ($500–$1,200/yr) are not included. Consult a CPA before making an election decision.

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California S-Corp Deadlines & Costs

Filing / Obligation Deadline (Calendar Year) Cost Type
IRS Form 2553 (Federal S-Corp election) March 15 (or within 75 days of formation) $0 One-time
California Form 3560 (CA S-Corp election) March 15 (15th day of 3rd month) $0 CA Required
$800 Minimum Franchise Tax (1st installment) April 15 (15th day of 4th month) $800 minimum Annual
California Estimated Tax Payments April 15, June 15, Sept 15, Jan 15 Varies (25%/25%/25%/25%) Annual
California Form 100S (Annual Return) March 15 (extension to Oct 15) Included in tax prep costs Annual
California 1.5% S-Corp Tax on Net Income Paid with Form 100S / estimated payments 1.5% of net income (min. $800) Annual
Federal Payroll Tax Deposits (EFTPS) Semi-weekly or monthly (based on liability) Employer portion of payroll taxes Ongoing
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California S-Corp FAQ

Yes — this is the single most common and costly mistake California business owners make. California does not automatically conform to the federal S-Corp election. Filing IRS Form 2553 makes your business an S-Corp for federal tax purposes only. Without a separately filed California Form 3560, the FTB will not recognize your S-Corp election. California will continue to tax your entity as an LLC or C-Corp until you file Form 3560 with a valid effective date. Missed years cannot typically be recovered without a successful FTB late election petition, which is not guaranteed.
The $800 minimum franchise tax is California's baseline annual tax imposed on all S-Corps, LLCs, and corporations doing business in the state — regardless of income or profit. It is due even if your business had zero revenue, lost money, or was inactive for part of the year. For S-Corps, the annual franchise tax is the greater of $800 or 1.5% of California net income. The first installment is due by the 15th day of the 4th month of the taxable year — April 15 for calendar-year businesses. It is paid via FTB Form 3539 (estimated) or with your Form 100S annual return.
Yes. California LLCs pay a gross receipts fee based on total income from all sources — not profit — in addition to the $800 minimum: $900 for income over $250,000 / $2,500 for income over $500,000 / $6,000 for income over $1,000,000 / $11,790 for income over $5,000,000. This fee is based on gross revenue, not profitability — a business with $1.2M in revenue and thin margins still owes $6,000. California S-Corps pay the 1.5% net income tax (minimum $800) instead of the gross receipts fee, which is typically lower for profitable businesses and far lower for high-revenue, low-margin businesses.
California Form 3560 must be filed by the 15th day of the 3rd month of the taxable year to be effective for that year. For calendar-year businesses (January–December), the deadline is March 15. If you miss this deadline, your California S-Corp election will not be effective until the following tax year. You will owe California taxes as an LLC or C-Corp for the year you missed. Unlike the IRS, the FTB grants late-election relief only in limited circumstances — do not count on it. File Form 3560 the same time you file IRS Form 2553.
Not automatically. California's $800 minimum franchise tax raises the breakeven threshold compared to other states. As a rough guide: if your net profit is below approximately $40,000–$50,000, the combined cost of the minimum tax, payroll compliance, and additional CPA fees may exceed your federal SE tax savings. At $80,000–$100,000+ in profit, the savings become substantial and the election is typically worth it. The LLC gross receipts fee dynamic also matters — if your LLC has high revenue but moderate profit, the S-Corp switch can be beneficial even at lower profit margins. Use the calculator above, then review the output with a California CPA before filing anything.
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Related Guides

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How to Get an EIN for Your S-Corp — IRS Form SS-4 Walkthrough
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Next Step
S-Corp Payroll Setup: Reasonable Salary Calculator & Tax Deadlines
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Get Your California S-Corp Done Right

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