California Corporation Taxes

| Gross Receipts Range | Additional Fee |

$250,000–$500,000	$900
$500,001–$1,000,000	$2,500
$1,000,001–$5,000,000	$6,000
$5,000,001+	$11,790

These fees are separate from your income tax liability and are calculated on California-source income only.

First-Year Exemption (Expired)

Corporations formed on or after January 1, 2000, previously received a first-year franchise tax exemption. This exemption expired December 31, 2023, per Cal. Rev. & Tax. Code § 17941(f). You now owe the full $800 minimum in your first taxable year.

Formation and Annual Compliance Costs

Beyond taxes, budget for these California-specific fees:

| Item | Cost |

Articles of Incorporation filing	$100
Annual Report filing	$25

The $100 formation fee is a one-time cost, while the $25 annual report fee recurs each year you maintain your corporation.

S-Corporation Election Benefits

Electing S-corporation status at the federal level provides California tax savings. Your S-corp income is taxed at 1.5% instead of 8.84%, though you remain subject to the $800 franchise tax minimum. This election is recognized at the California state level and can reduce your annual tax burden significantly if your business is profitable.

Estimated Tax Payments

You must make quarterly estimated tax payments on April 15, June 15, September 15, and January 15 under Cal. Rev. & Tax. Code § 17001 et seq. These payments cover your anticipated annual income tax liability and help you avoid penalties and interest.

Tax Authority Contact

The California Franchise Tax Board administers corporate taxes. Visit https://www.ftb.ca.gov/ for forms, payment options, and guidance on your specific tax situation.

Corporate Income Tax Rates: C-Corp vs. S-Corp

California imposes different corporate income tax rates depending on your entity election. C-Corporations pay 8.84% on net income, while S-Corporations pay only 1.5%. Both entity types remain subject to California's $800 minimum franchise tax annually under Cal. Rev. & Tax. Code § 17941.

C-Corporation Tax Rate

Your C-Corporation pays a flat 8.84% corporate income tax on California-source business income. This rate applies regardless of profitability—you owe the tax on net income after deductions. Additionally, you must pay the $800 annual minimum franchise tax, which is due April 15 each year under Cal. Rev. & Tax. Code § 17941.

C-Corporations also face potential double taxation: the corporation pays tax on profits, then shareholders pay personal income tax (1%–13.3% graduated) when you distribute dividends. This structure may be advantageous if you retain earnings within the business rather than distributing them.

S-Corporation Tax Rate

Your S-Corporation pays only 1.5% corporate income tax in California. This significantly lower rate makes S-Corps attractive for profitable businesses. Like C-Corporations, S-Corps remain subject to the $800 minimum franchise tax under Cal. Rev. & Tax. Code § 17941.

S-Corporations avoid double taxation: the entity itself pays the 1.5% tax, but income passes through to shareholders, who report their allocable share on personal returns at graduated rates (1%–13.3%). You must file Form 2553 federally and make the corresponding California election to be taxed as an S-Corporation.

Tax Rate Comparison Table

| Feature | C-Corporation | S-Corporation |

Corporate Income Tax Rate	8.84%	1.5%
Minimum Franchise Tax	$800/year	$800/year
Franchise Tax Due Date	April 15	April 15
Double Taxation Risk	Yes (corporate + shareholder level)	No (pass-through only)
Statute Citation	Cal. Rev. & Tax. Code §§ 17001–17039.6	Cal. Rev. & Tax. Code §§ 17001–17039.6

Key Considerations

The 5.84 percentage-point difference in corporate tax rates makes S-Corporation status valuable for businesses generating substantial net income. However, S-Corp status requires federal and state elections, payroll compliance, and more complex tax filings.

Both entity types must pay the $800 minimum franchise tax annually. This obligation begins from your incorporation date or the date you commence business in California under Cal. Rev. & Tax. Code § 17941(d)(1), with limited exceptions for certain inactive mining corporations.

For detailed guidance on which structure suits your business, consult the California Franchise Tax Board at ftb.ca.gov or a California tax professional.

Franchise Tax: The $800 Minimum Annual Obligation

California imposes an $800 annual minimum franchise tax on all corporations incorporated in the state or doing business here, effective immediately upon incorporation or qualification. This obligation applies regardless of whether your corporation generates revenue, and the first-year exemption that existed before December 2023 has expired. You must pay this tax every year your corporation remains active.

Who Must Pay the $800 Minimum

Under California Revised Uniform Limited Liability Company Act § 23153(a)–(d), every corporation incorporated under California law, qualified to do business in California, or doing business within the state must pay the $800 minimum franchise tax. The statute specifically applies to:

Domestic corporations incorporated in California
Foreign corporations qualified to transact intrastate business
Any corporation actively doing business in California

The tax obligation begins on the earlier of your incorporation date, qualification date, or the date you commence business operations.

Limited Exemptions

A narrow set of entities escape the $800 obligation. Credit unions are fully exempt. Additionally, nonprofit cooperative associations organized under California Food and Agricultural Code § 54001 et seq. that receive board of supervisors certification qualify for a five-year exemption from the minimum tax.

Two categories of inactive mining corporations pay only $25 annually: gold mining corporations inactive since 1950, and quicksilver mining corporations inactive since 1971 or for 24+ consecutive months. These exemptions are extremely limited and rarely apply to modern businesses.

When the Tax Is Due

Your franchise tax payment is due April 15 each year, per Cal. Rev. & Tax. Code § 17942. This deadline applies to all corporations subject to the minimum tax, regardless of your fiscal year or business structure.

Statute Citation

Cal. Rev. & Tax. Code § 23153(d)(1) establishes the $800 minimum. The Franchise Tax Board administers this obligation; you can find guidance at https://www.ftb.ca.gov/.

Gross Receipts Fees: Additional Costs for Higher-Revenue Corporations

California imposes additional gross receipts fees on corporations with California-source income exceeding $250,000. These fees apply annually and stack on top of the $800 minimum franchise tax. The amount you owe depends on your total gross receipts, with fees ranging from $900 to $11,790 per year under Cal. Rev. & Tax. Code § 17942.

Fee Structure by Revenue Tier

Your gross receipts fee is calculated based on total California-source income. The state defines "gross receipts, less returns and allowances reportable to this state" as the sum of gross receipts from business income and nonbusiness income, as specified in Cal. Rev. & Tax. Code § 25120.

| Gross Receipts Range | Annual Fee |

$250,001–$500,000	$900
$500,001–$1,000,000	$2,500
$1,000,001–$5,000,000	$6,000
$5,000,001+	$11,790

When Fees Apply

You begin owing gross receipts fees once your California-source income exceeds $250,000 in any taxable year. These fees are separate from and in addition to the $800 minimum franchise tax required under Cal. Rev. & Tax. Code § 23153(d)(1). Both the franchise tax and gross receipts fees are due annually by April 15.

Commonly Controlled Groups

If your corporation is part of a commonly controlled group, California combines the gross receipts of all group members to determine your fee tier. This aggregation rule, found in Cal. Rev. & Tax. Code § 23153(e)(1), means you cannot reduce fees by splitting operations among related entities.

Exemptions and Special Cases

Certain entity types are exempt from gross receipts fees. Limited partnerships, limited liability partnerships, and charitable organizations do not pay these fees under Cal. Rev. & Tax. Code § 23153(e)(4). However, standard C-corporations and S-corporations with California-source income above $250,000 have no exemption.

Deployed members of the U.S. Armed Forces who own small businesses (total income of $250,000 or less) may qualify for a complete franchise tax exemption under Cal. Rev. & Tax. Code § 23153(i), which would also eliminate gross receipts fees. This exemption applies only while the owner is deployed and the corporation operates at a loss or ceases operation, and it expires for taxable years beginning January 1, 2030.

Payment and Reporting

You report gross receipts fees on your annual California tax return filed with the Franchise Tax Board. The due date is April 15 without regard to extension. Failure to pay results in penalties and interest assessed by the Franchise Tax Board, which administers these fees under Cal. Rev. & Tax. Code § 17942.

For specific questions about your gross receipts calculation or fee obligation, contact the California Franchise Tax Board at https://www.ftb.ca.gov/.

First-Year Exemption: When It Applied and Current Status

California once offered corporations a significant tax break in their first year of operation, but that exemption has expired. Understanding when it applied and what you owe now is critical for compliance.

The Original First-Year Exemption (2000–2023)

California provided a first-year franchise tax exemption for corporations incorporated or qualified to do business on or after January 1, 2000. Under Cal. Rev. & Tax. Code § 23151(f)(1), qualifying corporations paid no minimum franchise tax during their first taxable year. This exemption applied broadly to domestic and foreign corporations, with limited exceptions.

The statute explicitly excluded certain entity types from this benefit. Limited partnerships, limited liability companies, limited liability partnerships, charitable organizations, regulated investment companies, real estate investment trusts, real estate mortgage investment conduits, and qualified Subchapter S subsidiaries could not claim the first-year exemption under Cal. Rev. & Tax. Code § 23151(f)(2).

Current Status: Exemption Expired December 2023

The first-year exemption expired on December 31, 2023. Your corporation now owes the full $800 minimum franchise tax beginning in its first taxable year, regardless of incorporation date.

All corporations—whether newly formed or long-established—must pay the $800 minimum annually starting with their first tax year. This change significantly increased the cost of California incorporation for new businesses.

What You Owe Now

You must pay California's $800 minimum franchise tax annually from the earlier of your incorporation date, qualification date, or the date you commence business in California. This obligation continues until you file a certificate of dissolution or cease doing business in the state.

The franchise tax is due April 15 each year. If your corporation has gross receipts exceeding $250,000, you may owe additional fees ranging from $900 to $11,790 depending on your income level, calculated under Cal. Rev. & Tax. Code §§ 17941–17942.

Limited Exceptions Still Available

A few narrow exemptions remain available. Credit unions and nonprofit cooperative associations meeting specific requirements under Cal. Rev. & Tax. Code § 23151(c) are exempt. Additionally, small businesses solely owned by deployed U.S. Armed Forces members may qualify for a temporary exemption if the corporation operates at a loss during deployment, though this provision sunsets January 1, 2030.

These exceptions do not apply to standard for-profit corporations. If you operate a standard C-corporation or S-corporation, you cannot avoid the $800 minimum franchise tax in your first year.

Estimated Tax Payments: Quarterly Deadlines

California corporations must make quarterly estimated tax payments on four specific dates throughout the year. Your payment deadlines are April 15, June 15, September 15, and January 15. These deadlines apply to C-corporations and S-corporations subject to California income tax under Cal. Rev. & Tax. Code §§ 17001–17039.6.

When Payments Are Due

Your estimated tax payments are due on the following dates each year:

| Payment | Due Date |

1st Quarter	April 15
2nd Quarter	June 15
3rd Quarter	September 15
4th Quarter	January 15

The January 15 deadline applies to the following calendar year, meaning your fourth quarter payment for 2024 is due January 15, 2025.

Who Must Pay Estimated Taxes

You must make quarterly estimated tax payments if your corporation expects to owe California income tax. C-corporations pay at the 8.84% rate, while S-corporations pay at 1.5% under California law. Both entity types are subject to the $800 minimum franchise tax annually, due April 15, which is separate from your estimated income tax payments.

Calculating Your Estimated Amount

Contact the California Franchise Tax Board (FTB) at ftb.ca.gov for specific payment instructions and to determine your estimated tax amount. The FTB administers California's income tax system and can provide worksheets to calculate your quarterly obligations based on your projected income.

Penalties for Underpayment

Failure to make adequate estimated payments results in penalties and interest assessed by the California Franchise Tax Board. The penalty is calculated based on the amount of underpayment and the period it remained unpaid. Even if you ultimately owe less tax than estimated, you must pay the quarterly amounts to avoid penalties.

Annual Report and Tax Filing Deadlines

California corporations face multiple annual filing and tax payment obligations. Your primary deadlines depend on whether you're filing a franchise tax return, paying estimated taxes, or submitting an annual report. Missing these deadlines can result in penalties and loss of good standing.

Franchise Tax Due Date

Your California franchise tax return and minimum franchise tax payment are due April 15 each year, per Cal. Rev. & Tax. Code § 17942. This applies to all corporations incorporated in California or qualified to do business in the state, unless you qualify for a specific exemption.

The minimum franchise tax is $800 annually, beginning in your first taxable year. The first-year exemption that previously applied to corporations formed on or after January 1, 2000, expired December 31, 2023, and no longer applies.

If your corporation has gross receipts exceeding $250,000, you owe an additional fee on top of the $800 minimum: