LLC vs S-Corp in California

Side-by-side comparison of Limited Liability Company and S Corporation for California businesses. See costs, tax treatment, and which structure fits your situation.

At a Glance

Feature	LLC	S-Corp
Filing fee (California)	$70	$70
Annual fee	$800/yr	$800/yr
Liability protection	Yes	Yes
Self-employment tax	On all profit	Salary only
Formation complexity	low	medium
Ongoing complexity	low	medium
Can raise funding	Limited	Limited

Pros & Cons

LLC

Pros

+Personal assets protected from business debts
+Pass-through taxation — no double tax
+Flexible management structure
+Can elect S-Corp taxation later

Cons

-Self-employment tax on all profit (same as sole prop)
-State filing fees and annual fees
-Some states have franchise taxes (e.g., CA $800/yr)
-Operating agreement recommended

S-Corp

Pros

+Save thousands in self-employment tax
+Only pay payroll tax on salary, not distributions
+Liability protection
+Pass-through taxation — no double tax

Cons

-Must pay yourself a "reasonable salary"
-Payroll requirements ($1-2K/yr in CPA and payroll costs)
-More complex tax filing (Form 1120-S)
-Restrictions: max 100 shareholders, US residents only, one class of stock

Who Should Choose What

Choose LLC if you...

→Most small businesses
→Freelancers earning $40K+
→Businesses with liability risk
→Multi-member businesses

Choose S-Corp if you...

→Businesses earning $80K+ net
→Solopreneurs with consistent income
→Service-based businesses
→Consultants and professionals

California-Specific Considerations

⚠$800 annual franchise tax minimum — even if you earn $0

⚠S-Corps pay 1.5% entity-level tax

⚠Highest state income tax rate in the US at 13.3%

⚠LLC fee increases based on gross receipts ($250K+ gross receipts triggers additional fees)

Not sure which is right?

Our free quiz calculates your actual tax burden under each entity type based on your income and California tax rates.

Take the Quiz

Form Your Business in California

ZenBusinessRecommended

LLC: $0 + state fee

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Northwest Registered AgentRecommended

LLC: $39 + state fee

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Bizee (formerly Incfile)

LLC: $0 + state fee

Free LLC formation with no hidden costs

More Comparisons in California

LLC vs C-Corp S-Corp vs C-Corp LLC vs Sole Prop

LLC vs S-Corp FAQ

What is the difference between LLC and S-Corp in California?

Limited Liability Company: Liability protection with pass-through taxation. The most popular choice for small businesses. S Corporation: An LLC or Corp with an S-Corp tax election. Splits income into salary + distributions to reduce self-employment tax. In California, LLC filing costs $70 and S-Corp costs $70.

Is LLC or S-Corp better for taxes in California?

S-Corp is generally better for taxes at higher incomes because you only pay self-employment tax on your salary, not distributions. LLC pays self-employment tax (15.3%) on all profit. Use our free quiz for exact numbers.

How much does it cost to file an LLC vs an S-Corp in California?

LLC filing fee: $70, annual fee: $800/year. S-Corp filing fee: $70, annual fee: $800/year. California also charges a $800/year franchise tax.

Disclaimer

This comparison is for educational purposes only and does not constitute tax, legal, or financial advice. Filing fees, tax rates, and regulations may have changed since this data was compiled. Verify all information with the California Secretary of State and consult a qualified CPA or tax attorney before making entity selection or tax election decisions.

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