Surprise! The minimum annual $800 each corporation (and LLC) is required to pay to the California Franchise Tax Board (the FTB) is only a minimum, not a flat tax. S corporations in California (strictly speaking, every S corporation that has California source income) are required to remit 1.5% of their income to the FTB annually. The $800 is not in addition, but represents about $5,334 of net income. Of course, folks do what they can to bring that number down to zero (or below, thereby creating a loss). That said, the $800 is still owing, whether the corporation’s income is a profit or a loss. Keep this in mind when weighing the pros and cons between an S corporation or an LLC. See this FAQ for the tax on LLC revenue in California.
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