An S corporation is a federal and state tax election, not a separate legal entity type. In California in 2026, most businesses seeking S corporation treatment first form a corporation and then file an election with the IRS. The California filing fee for a general stock corporation is $100.

To start a California S corporation, you generally need to:

  1. Form a California corporation or use an eligible existing entity.
  2. File Articles of Incorporation with the California Secretary of State.
  3. Create corporate records, appoint directors and officers, and issue shares.
  4. Obtain an Employer Identification Number from the IRS.
  5. File IRS Form 2553 to elect S corporation tax treatment.
  6. File California's Statement of Information.
  7. Set up payroll if you work for the corporation or hire employees.
  8. File federal and California S corporation tax returns each year.

An S corporation election can reduce payroll taxes in some situations, but it also creates payroll, bookkeeping, tax filing and corporate-record requirements.

California S Corporation Requirements at a Glance

Requirement Current rule
California formation filing File Articles of Incorporation with the California Secretary of State
California filing fee $100 for Articles of Incorporation for a general stock corporation
Initial Statement of Information Due within 90 days after incorporation
Ongoing Statement of Information Due every year for a California stock corporation; the filing fee is generally $25
Federal S corporation election File IRS Form 2553, generally within 2 months and 15 days after the beginning of the tax year
Federal shareholder limit No more than 100 shareholders
Stock structure One class of stock
California S corporation tax Generally 1.5% of California net income, subject to the $800 minimum franchise tax
Federal tax return Form 1120-S
California tax return Form 100S
Payroll registration Register with the California Employment Development Department when the business becomes a subject employer

The California Secretary of State's current corporation fee schedule provides the filing fee and Statement of Information requirements.

1. Decide Whether an S Corporation Fits the Business

An S corporation is a tax classification. It is not a separate entity type that you select with the California Secretary of State.

Before filing, decide whether the business should be:

  • A California corporation that elects S corporation tax treatment
  • An LLC that elects to be taxed as an S corporation
  • A corporation that remains taxed as a C corporation
  • An LLC taxed under its default federal classification

A California corporation is legally separate from its owners. The S corporation election determines how the entity is taxed. You form the corporation first, then make the election with the IRS.

S corporation treatment may fit when:

  • The business produces consistent profit.
  • The owner actively works in the business.
  • The owner is prepared to run payroll.
  • The business can support separate accounting and annual tax filings.
  • The shareholders meet the eligibility requirements.

It may be a poor fit when the business has little or inconsistent profit, the owner wants minimal administration or the business expects venture-capital investment. An S corporation generally cannot have more than 100 shareholders, nonresident alien shareholders or more than one class of stock.

2. Choose and Check the Corporation's Name

Choose a name that follows California's corporation naming rules and is distinguishable from existing entities. Search the California Secretary of State's business database before filing.

Name reservation is optional. The corporation also needs a California street address and an agent for service of process. The agent receives lawsuits and official legal notices for the corporation.

Addresses and agent information submitted to the Secretary of State are generally public records.

3. File California Articles of Incorporation

File Articles of Incorporation for a General Stock Corporation, commonly Form ARTS-GS, with the California Secretary of State.

The filing generally includes:

  • The corporation's legal name
  • Its initial street and mailing addresses
  • Its agent for service of process
  • The corporation's purpose
  • The number of authorized shares
  • The incorporator

The current filing fee for a California general stock corporation is $100. The corporation legally begins when the Secretary of State endorses the Articles of Incorporation.

If the business provides a licensed professional service, check whether California requires a professional corporation or approval from a licensing board before filing ordinary corporation documents.

4. Complete the Corporation's Internal Setup

After the Articles are accepted, complete the corporation's organizational records. These documents are not generally filed with the Secretary of State, but they help show that the corporation operates as a separate legal entity.

The corporation should generally:

  • Adopt bylaws.
  • Appoint the initial directors.
  • Appoint officers, such as a president, secretary and treasurer.
  • Approve the corporation's bank account.
  • Approve the S corporation election.
  • Authorize ownership of business assets and contracts.
  • Issue shares to the shareholders.
  • Record ownership in a stock ledger.
  • Document major decisions through board or shareholder resolutions.

The number of shares authorized in the Articles is not the same as the percentage of ownership issued to each shareholder. Keep written records showing who owns the shares and when they were issued.

5. Obtain an EIN From the IRS

Apply for an Employer Identification Number, or EIN, after the corporation has been formed.

The IRS advises businesses forming a corporation or LLC to create the entity through the state before applying for an EIN. The number is used for federal tax filings, banking, payroll and many California registrations.

Use the corporation's exact legal name and formation information on the EIN application. The Articles, EIN confirmation, bank account and Form 2553 should use matching information. Differences can delay or complicate the S corporation election.

6. File IRS Form 2553

File IRS Form 2553, Election by a Small Business Corporation, to elect S corporation tax treatment.

All shareholders generally must consent to the election, and an authorized corporate officer must sign the form. The corporation must meet the federal eligibility requirements, including:

  • It is a domestic corporation.
  • It has no more than 100 shareholders.
  • Its shareholders are eligible under the federal rules.
  • It has only one class of stock.

When Is Form 2553 Due?

For an existing calendar-year corporation, Form 2553 is generally due by March 15 for the election to apply to that tax year.

More broadly, the IRS requires Form 2553 to be filed no later than 2 months and 15 days after the beginning of the tax year for which the election is intended to apply. A corporation may also file during the preceding tax year.

If the deadline has passed, late-election relief may be available if the corporation meets the IRS requirements. Filing Form 2553 late does not automatically make the election effective.

California generally treats a corporation as an S corporation when it has made a valid federal S corporation election. A separate California S corporation election is generally not required.

7. File the California Statement of Information

File the corporation's initial Statement of Information with the California Secretary of State within 90 days after incorporation.

A California stock corporation generally files a Statement of Information every year during its required filing period. The current filing fee is generally $25.

The filing updates information such as:

  • Principal business address
  • Mailing address
  • Officers
  • Directors
  • Agent for service of process
  • Business activity
  • Labor judgment information required by the form

Failure to file can result in penalties, suspension or forfeiture of the corporation. California stock corporations generally file every year. California LLCs generally file every two years.

8. Set Up Payroll for Shareholder-Employees

An S corporation shareholder who performs services for the corporation generally must receive reasonable compensation as wages before taking non-wage distributions.

The IRS can reclassify distributions as wages when a shareholder-employee receives inadequate compensation for services performed. Reasonable compensation depends on factors such as:

  • The shareholder's duties
  • Experience
  • Time spent working for the company
  • Comparable pay
  • The company's revenue sources
  • Payments made to other employees

Payroll typically requires:

  • A payroll system or payroll provider
  • Federal payroll tax deposits
  • California payroll tax registration
  • Form W-2 reporting
  • Quarterly or periodic payroll filings
  • Workers' compensation coverage when required
  • New-hire reporting

California employers generally must register with the Employment Development Department within 15 days after becoming a subject employer. A business generally becomes a subject employer when it pays more than $100 in wages in a calendar quarter.

If you own and operate the S corporation, establish payroll before treating payments to yourself as distributions.

9. Open a Business Bank Account and Keep Separate Records

Use a bank account in the corporation's legal name. Do not mix personal and corporate expenses.

Maintain records for:

  • Revenue and expenses
  • Payroll
  • Shareholder distributions
  • Shareholder loans
  • Reimbursements
  • Fixed assets
  • Customer contracts
  • Corporate resolutions
  • Stock ownership
  • Tax filings

California identifies separate bank accounts and separate records as important S corporation features. Keeping the records separate also supports the corporation's liability protection and makes the tax return easier to prepare.

10. Register for Required Licenses and Tax Accounts

An S corporation may need registrations beyond the Secretary of State and IRS filings.

Depending on the business, check for:

  • City or county business licenses
  • California seller's permit
  • Sales and use tax registration
  • Professional licensing
  • Industry permits
  • Fictitious business name registration
  • Workers' compensation requirements
  • Local zoning or home-business rules
  • California payroll tax accounts

The California Secretary of State directs businesses to state and local resources, including CalGOLD, to identify licenses and permits.

California S Corporation Taxes and Annual Filings

California Franchise Tax

A California S corporation generally pays the greater of:

  • 1.5% of California net income, or
  • The $800 minimum franchise tax

The $800 minimum generally applies even if the corporation is inactive, operates at a loss or has no income. California generally waives the minimum franchise tax for a newly formed or newly qualified corporation's first taxable year. First-year net income can still be subject to the 1.5% tax.

Federal and California Tax Returns

A calendar-year S corporation generally files:

  • Federal Form 1120-S
  • Schedule K-1 for each shareholder
  • California Form 100S
  • California Schedule K-1 for each shareholder
  • Required payroll tax returns
  • Estimated tax payments when applicable

California Form 100S is generally due on the 15th day of the third month after the close of the corporation's tax year. For a calendar-year corporation, that is generally March 15, adjusted to the next business day if the deadline falls on a weekend or legal holiday.

California provides an automatic filing extension, but an extension does not extend the time to pay tax.

California Pass-Through Entity Elective Tax

For taxable years beginning on or after January 1, 2026, and before January 1, 2031, an eligible S corporation may elect California's pass-through entity elective tax.

The tax is generally 9.3% of qualified net income. Eligible shareholders may receive a corresponding California personal income tax credit.

The election has specific timing requirements. For tax years from 2026 through 2030, the entity generally makes an initial payment by June 15 and pays the remaining amount by the original return due date. The election can benefit some shareholders, but the result depends on eligibility, shareholder status and federal tax treatment. Have a tax professional review the election before relying on it.

Current BOI Reporting Note for California Corporations

As of September 20, 2026, FinCEN states that companies created under U.S. law, including domestic California corporations, are exempt from federal Beneficial Ownership Information reporting under the current rule. Foreign entities registered to do business in the United States may still have reporting obligations.

BOI rules have changed several times. Verify the current FinCEN rule if the corporation has foreign ownership or was formed outside the United States.

Common Mistakes to Avoid

  • Filing Form 2553 after the deadline without requesting late-election relief.
  • Paying shareholder distributions without establishing reasonable wages.
  • Treating the $800 California tax as optional because the company lost money.
  • Mixing personal and corporate expenses.
  • Failing to file the annual Statement of Information.
  • Issuing multiple economic classes of stock.
  • Accepting an ineligible shareholder.
  • Forgetting payroll registration or workers' compensation requirements.
  • Assuming an S corporation election eliminates all California taxes.
  • Forming a corporation when an LLC taxed as an S corporation would better fit the business.

Bottom Line

For most new California businesses seeking S corporation treatment, the sequence is:

Form a California general stock corporation, obtain an EIN, adopt bylaws and issue shares, file Form 2553 on time, register for payroll, file the Statement of Information, and complete the required federal and California tax filings.

The election is most useful when the business has enough stable profit to justify payroll and the additional administration. Before filing, have a California tax professional review the owner's reasonable salary, shareholder eligibility, election deadline and possible pass-through entity tax treatment.