State guide · California · 2026 rules
S corporation in California: what the election changes
California adds its own layer to the S-corp math: a 1.5% franchise tax on the business, the end of the LLC fee, and state payroll taxes on your salary. Enter your numbers below.
Choose a state and enter your profit and salary to see the comparison.
A 1.5% franchise tax replaces the LLC tax and fee
California taxes an S corporation at 1.5% of its California net income, with an $800 annual minimum. Net income here is the profit after your salary.
A single-member LLC pays the $800 annual LLC tax plus an LLC fee once total California income reaches $250,000 ($900 at $250,000, up to $11,790 at $5 million or more). Once the LLC elects, both stop and the 1.5% tax applies instead.
An existing LLC that elects gets no first-year break: it owes the $800 minimum, or 1.5% of net income if that is more, from its first S year. Only a newly formed entity classified as an S corporation from its first year skips the minimum in that year.
Payroll taxes on your salary
Unemployment insurance: 3.4% for a new employer on the first $7,000 of wages in 2026, plus the 0.1% Employment Training Tax on the same $7,000. The member of an LLC taxed as a corporation is a statutory employee for these taxes.
State Disability Insurance: 1.3% of all wages, withheld from your pay, with no wage cap since 2024. An LLC owner who elects cannot opt out; only the sole shareholder of an incorporated corporation can.
California has been a federal credit-reduction state, which raises the federal unemployment tax on the first $7,000: the reduction was 1.2% for 2025, and the 2026 figure is set on November 10, 2026.
The optional pass-through entity tax
A one-owner S corporation can elect California’s 9.3% pass-through entity elective tax, which runs through 2030. Its value depends on your federal itemized deductions, so the calculator leaves it out.
Worked examples
A single-member LLC owner, single filer, 22% federal bracket, default payroll and return costs. The figure is total tax and added costs as an S corporation compared with staying as you are.
| Profit / salary | Statewide |
|---|---|
| $80,000 / $45,000 | $148 lower |
| $120,000 / $60,000 | $2,349 lower |
| $200,000 / $90,000 | $6,149 lower |
These examples assume total California income under $250,000, so no LLC fee applies today. Above that, the fee that stops makes the election look better.
Starting payroll in California
One account with the Employment Development Department (EDD) covers unemployment insurance, the Employment Training Tax, SDI and state income tax withholding. Register within 15 days of paying more than $100 in wages: EDD e-Services for Business.
The S corporation files Form 100S each year. California follows the federal S election; there is no separate state form.
Other states
- Alabama
- Alaska
- Arizona
- Arkansas
- California
- Colorado
- Connecticut
- Delaware
- Florida
- Georgia
- Hawaii
- Idaho
- Illinois
- Indiana
- Iowa
- Kansas
- Kentucky
- Louisiana
- Maine
- Maryland
- Massachusetts
- Michigan
- Minnesota
- Mississippi
- Missouri
- Montana
- Nebraska
- Nevada
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Ohio
- Oklahoma
- Oregon
- Pennsylvania
- Rhode Island
- South Carolina
- South Dakota
- Tennessee
- Texas
- Utah
- Vermont
- Virginia
- Washington
- Washington, DC
- West Virginia
- Wisconsin
- Wyoming
Sources
- FTB, S corporations
- FTB Publication 1123, Guide to Common Forms of Ownership (LLC classified as an S corporation)
- FTB, Limited liability company
- R&TC 23153(f)(1), (3)
- FTB 2025 Form 100S Booklet, General Information B
- R&TC 23802(c)
- R&TC 17941(d)
- R&TC 17942(a)(1)
- FTB, Pass-through entity (PTE) elective tax
- EDD, Tax Rates, Wage Limits, and Value of Meals and Lodging
- EDD, California Employer’s Guide 2026 (DE 44 Rev. 52 (4-26)), Classifying Employees
- EDD, Information Sheet: Types of Employment (DE 231TE Rev. 1 (5-16))
- EDD, Information Sheet: Limited Liability Entities (DE 231LLC Rev. 2 (12-14)); CUIC 621(f)
- CUIC 637.1
Federal figures: IRS Publication 15 (2026), Schedule SE and Form 2553 instructions. Every figure was read on an official page and checked a second time. Checked October 24, 2026. How we check facts.