How Do I Convert My LLC to an S-Corp in California?

You cannot formally "convert" an LLC to an S-Corp under California law. Instead, file Form 2553 (Election by a Small Business Corporation) with the IRS to elect S-Corp federal tax treatment. Your LLC remains an LLC under California law (Cal. Rev. & Tax. Code § 17941) but is taxed as an S-Corporation federally. No state filing or name change is required. This election reduces self-employment tax on distributions while maintaining LLC liability protection.

The Election Process

An LLC-to-S-Corp "conversion" is actually a federal tax election, not a legal entity change. Your LLC stays registered with California's Secretary of State.

Steps:

File IRS Form 2553 with the IRS (not California)
Ensure your LLC has ≤100 eligible shareholders and only one class of stock
Obtain written consent from all members
File timely—generally within 2 months and 15 days of your tax year start, or by March 15 for calendar-year filers

California recognizes federal S-Corp elections automatically under Cal. Rev. & Tax. Code § 17941. No separate state election form is required.

California Tax Obligations

Your LLC remains subject to California's $800 annual franchise tax minimum (Cal. Rev. & Tax. Code § 17941). If California-source gross receipts exceed $250,000, you owe additional tiered fees: $900 ($250K–$500K), $2,500 ($500K–$1M), $6,000 ($1M–$5M), $11,790 ($5M+) (Cal. Rev. & Tax. Code § 17942).

California taxes S-Corp income at graduated rates (1%–13.3%) passed through to members (Cal. Rev. & Tax. Code §§ 17001–17039.6). Franchise tax is due April 15 annually.

Continue filing biennial Statements of Information (Form LLC-12) within 90 days of formation, then every 2 years ($20 filing fee) (Cal. Rev. & Tax. Code § 17941).

Federal Tax Benefits

An S-Corp election allows you to pay yourself a reasonable W-2 salary and take remaining profits as distributions. Distributions avoid the 15.3% self-employment tax, reducing overall tax burden compared to pass-through LLC taxation. This strategy works best if net profit significantly exceeds a reasonable salary.

You must establish payroll and file quarterly estimated tax payments (April 15, June 15, September 15, January 15). File Form 1120-S federally each year.

Next Steps

Consult a CPA or tax attorney to confirm S-Corp election benefits your situation and to ensure timely Form 2553 filing. Contact the California Franchise Tax Board (ftb.ca.gov) or the IRS for detailed guidance on eligibility and deadlines.

This is general information, not legal advice.