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S-Corp Tax in California and New York City
The short answer: California taxes S-corps 1.5% of net income, with an $800 minimum. An LLC already pays the $800 LLC tax, so for most small owners the S-corp election adds little state cost. New York City doesn't recognize S-corps and charges its 8.85% General Corporation Tax on the profit, which can wipe out most of the savings. In NYC, break-even with a $50,000 salary is about $84,000 of profit, not $66,000.
California
- S-corp tax: 1.5% of California net income, with an $800 minimum franchise tax each year (California FTB: S corporations).
- LLCs pay an $800 annual LLC tax too, plus an LLC fee once gross receipts reach $250,000. If your LLC elects S-corp, the 1.5% / $800 S-corp tax applies instead of being added to it, so you're comparing 1.5% of net income with the $800 you already pay.
- Example: with $100,000 of profit and a $50,000 salary, net income after salary and costs is around $44,000. 1.5% is about $660, so you pay the $800 minimum, the same as before. The federal savings of about $4,800 stay intact.
- Net income only starts to cost more than $800 above about $53,000 of S-corp profit after salary.
New York City
- NYC taxes S-corps under its General Corporation Tax, generally 8.85% of NYC net income, with a minimum based on gross receipts that starts at $25 (NYC General Corporation Tax for S-corps (summary)).
- Sole proprietors and default LLCs in NYC pay the 4% Unincorporated Business Tax instead, but small businesses get most or all of it back as a credit.
- Example: at $100,000 of profit and a $50,000 salary, the federal savings of about $4,800 drop to about $870 after the city tax. At $150,000, savings are about $3,500 instead of $11,900.
- New York State recognizes S-corps but requires its own election (Form CT-6).
Savings compared (salary $50,000)
| Profit | No-tax state | California | New York City |
|---|---|---|---|
| $80,000 | $2,012 | $2,012 | −$185 |
| $100,000 | $4,838 | $4,838 | $871 |
| $150,000 | $11,902 | $11,284 | $3,511 |
| $200,000 | $18,942 | $17,574 | $6,126 |
Yearly savings after $1,600 of extra costs, 2026 federal rates. California assumes the LLC already pays the $800 tax. Leaves out state unemployment tax on salary and the California LLC fee above $250,000 of gross receipts.
Other states and cities
Most states follow the federal S-corp election with no extra entity tax. A few charge S-corps something: Illinois has a 1.5% replacement tax, and some cities tax business income (Philadelphia, San Francisco, Portland, Oregon). The S-corp savings calculator fills in rates for the 10 largest states and asks about NYC.
Next steps: how to elect S-corp and setting a reasonable salary. Back to the LLC vs. S-corp guide.
FAQ
What is California's S-corp tax rate?
1.5% of California net income, with an $800 minimum franchise tax each year.
Is an S-corp worth it in California?
Often, yes. Most small LLCs already pay California's $800 LLC tax, and the S-corp's 1.5% tax replaces it, so the federal payroll tax savings mostly remain.
Does NYC recognize S corporations?
No. New York City taxes S-corps under its General Corporation Tax at 8.85% of net income, which sharply reduces the savings.
Do I need a separate New York State S-corp election?
Yes. New York State requires its own election, Form CT-6, in addition to the federal Form 2553.
Sources: California FTB: S corporations · NYC General Corporation Tax for S-corps (summary) · IRS: self-employment tax. General information for planning, not tax, legal or financial advice.