Discussion:LLC to a S Corp (Calif.)

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Discussion Forum Index --> Basic Tax Questions --> LLC to a S Corp (Calif.)

Discussion Forum Index --> Tax Questions --> LLC to a S Corp (Calif.)

Ztom (talk|edits) said:

3 December 2011
Have a client with LLC, her gross reciepts are over 400k, so she pays an extra $1700 tax to calif. There are only two people(husband and wife) in LLC. I think they should convert to a S so they dont have to pay the extra $1700. Any thoughts?

KatieJ (talk|edits) said:

3 December 2011
If the LLC elects corporate treatment it will not be subject to the LLC fee. However, as an S corporation for tax purposes it will be subject to the corporate franchise tax at 1.5% of taxable income allocated and apportioned to California (3.5% for a financial corporation), with an annual minimum of $800.

The $1,700 you refer to is the $800 minimum tax plus the $900 LLC fee for an LLC with gross receipts between $250K and $500K. An S corporation is subject to the $800 minimum or the measured tax, whichever is greater. Whether your client's LLC would pay more or less as an S corporation depends on how much taxable income it has. If the clients take all or most of the S corporation's net income out in deductible salaries, the entity level tax will be only the $800 minimum.

Note the LLC must make a federal corporate and S election in order to get that treatment for California purposes.

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