Types of State Taxes

Corporate Income Tax

California’s corporate income tax of 8.84% applies to corporations and is based on income earned in California. Income from “pass-through" entities like S-corporations, limited liability companies (LLCs), partnerships, and sole proprietorships is subject to the state’s tax on personal income.

Franchise Tax

California’s franchise tax applies to S-Corps, standard limited liability companies (LLCs), limited partnerships (LPs), and limited liability partnerships (LLPs), as well as traditional corporations (C corporations). The corporations and LLCs that are subject to the corporate income tax are not subject to the franchise tax. With the exception of S-corps, in most cases, the franchise tax is a flat fee of $800.

Alternative Minimum Tax

California has an alternative minimum tax (AMT) that is similar to the Federal AMT. The AMT is intended to ensure wealthy taxpayers do not use loopholes to avoid paying taxes. It is calculated in parallel with your regular taxes and generally targets corporations with Alternative Minimum Taxable Income (AMTI) over $40,000.


Tax by Business Type

Sole Proprietorship

As a sole proprietor, income from your business is distributed to you directly. You will pay taxes on that income on your personal tax return and attach a Profit or Loss From Business form to your state and federal returns. If you are a farmer, you will use the Profit or Loss from Farming form instead.
Filing Requirements from the CA Franchise Tax Board

General Partnerships

In a general partnership, the partners receive income from the business directly. They pay tax on that income on their personal federal and state tax returns. The partners must also file a Partnership Return of Income (California Form 565).
Filing Requirements from the CA Franchise Tax Board

Limited Partnership (LP) and Limited Liability Partnership (LLP)

Limited partnerships and limited liability partnerships pay the Limited Partnership Annual Tax of $800. As with the General Partnership, the partners must also file Partnership Return of Income (California Form 565).
Filing Requirements from the CA Franchise Tax Board

Limited Liability Company (LLC)

Standard California LLCs are required to pay the minimum franchise tax of $800. LLCs also pay the LLC fee, which is a flat fee based on income and ranges from $0 to $11,790. As in a General Partnership, members of an LLC are taxed at the member level and pay taxes on their personal federal and state tax returns. Some LLCs are classified as corporations. These companies must follow all the filing requirements of either a C-Corp or S-Corp, depending on their classification.
Filing Requirements from the CA Franchise Tax Board

C-Corporation

If you do not have any taxable income this year, you will only pay a flat fee of $800. Otherwise, you will owe the annual tax rate of 8.84% and must file Form 100 (California Franchise or Income Tax Return).
Filing Requirements from the CA Franchise Tax Board

S-Corporations

California requires S corporations to pay a 1.5% franchise tax on income, with a minimum tax of $800. In addition, an individual S-Corp shareholder will owe tax to the state on his or her share of the company’s income.
Filing Requirements from the CA Franchise Tax Board

*Rates and regulations are subject to change without notice. Please refer to the California Franchise Tax Board for the most up-to-date rates and regulations.

Last modified date: Thu, 04/07/2016 - 16:21