California is one of the few States that require you to pay a Franchise Fee at the S Corp level. The Fee is calculated by determining greater of the net taxable income derived from California then multiplied by 1.5% or $800 (It's your first year? Then you are not subject to the minimum $800 but the 1.5% component still applies).
In short, You take the income you received minus your expenses then multiply the net number by 1.5%.
In addition, California passed a bill called AB150. In short, AB150 allows you to pay tax at the S Corp level at the rate of 9.3% to California on the net income from your business.
So why make the election? This will allow you to receive a tax credit on your California individual tax return for any taxes paid at the S Corp level. Plus you will be able to claim the payment you made to California as a business expense on your S Corp Federal tax return. Want to learn more? California published this helpful article.
Note: Both the Franchise fee and the AB150 payments should be made with your business checking account.
California sure didn't make it easy but that's why you have us. We have outlined the instructions below on how to remit the payments depending on your entities situation. If you recently registered with the California Secretary of State then the online payment option may not be available. California typically takes 3-6 months from your registration date to allow you to make the payment online.
Pass Through Entity Elective Tax (AB150)
Select FTB
Select entity type as LLC if you have a 12-digit number or Corp if you have a 7-digit number
Enter your entity ID
Type the characters from the picture and select "Login"
Verify that your business name is listed correctly under the Entity Name and then enter your contact information before selecting "Continue"
Take one of the following actions:
If you entered the 12-digit entity number then skip this step or
If you entered the 7-digit entity number then select the radio button that states "Form 100, 100S, 100W, or 100X".
Payment type will be Pass-Through Entity Elective Tax (Form 3893)
Enter the date range for the time period you are paying for. IE for 2022, you enter the later of 01/01/2022 or the date you established the LLC through 12/31/2022.
Enter the payment amount and payment date then select "Continue"
Enter your business checking accounts routing and account number and select "continue"
Be sure to send your confirmation of payment to [email protected]
Entity ID Number to use for Electronic Payment Methods
Note: If you are unsure which entity ID to use when making electronic payments, see this website to help you determine which to use!
California issued me a 12-digit entity number (Franchise Fee)
Select FTB
Select entity type as Limited Liability Company (LLC)
Enter your 12-digit entity ID
Type the characters from the picture and select "Login"
Verify that your business name is listed correctly under the Entity Name and then enter your contact information before selecting "Continue"
Take one of the following actions:
For an estimated tax payment then select "Estimated Fee Payment (Form 3536)" or
For a balance due payment then select "Annual Tax Payment (Form 3522)"
Enter the date range for the time period you are paying for. IE for 2022, you enter the later of 01/01/2022 or the date you established the LLC through 12/31/2022.
Enter your business checking accounts routing and account number and select "continue"
Be sure to send your confirmation of payment to [email protected]
California issued me a 7-digit entity number (Franchise Fee)
Select FTB
Select entity type as Corporation
Enter your 7-digit entity ID
Type the characters from the picture and select "Login"
Verify that your business name is listed correctly under the Entity Name and then enter your contact information before selecting "Continue"
Select the radio button that states "Form 100, 100S, 100W, or 100X"
Take one of the following actions:
For an estimated tax payment then select "Estimated Tax Payment (Form 100ES) or
For a balance due payment then select "Original Return Payment (Form 100, 100S, 100W, or 3586)"
Enter the date range for the time period you are paying for. IE for 2022, you enter the later of 01/01/2022 or the date you established the S Corp through 12/31/2022.
Take of one of the following actions:
For an estimated tax payment select "Add an estimated tax payment" and enter the payment amount and payment date then select "continue". You need to then select "continue" one more time when the new screen populates
For a balance due payment enter the payment amount then enter the payment date and select "continue"
Enter your business checking accounts routing and account number and select "continue"
Be sure to send your confirmation of payment to [email protected]
I don't know what California issued me
This is used to find the 12-digit Secretary of State entity ID.
Go to the Secretary of State website
Enter your business name and select the magnifying glass (search icon)
Locate your business name, and your 12-digit entity number will be located on the right hand panel
Disclaimer: The information contained in this document is provided for informational purposes only and should not be construed as financial or tax advice. It is not intended to be a substitute for obtaining accounting or other financial advice from an appropriate financial adviser or for the purpose of avoiding U.S. Federal, state or local tax payments and penalties.