S-Corporation

An S-corporation is a corporation that has elected pass-through tax treatment under Subchapter S of the Internal Revenue Code. Profits and losses flow through to shareholders' personal returns, avoiding the double taxation that applies to C-corps.

Eligibility is strict: 100 or fewer U.S.-resident individual shareholders, one class of stock, and timely election. The structure is common for service businesses, small operating companies, and family enterprises that want corporate formalities without corporate-level tax.

California recognizes the S-election but still imposes a 1.5 percent franchise tax (minimum $800) at the entity level. We help founders compare S-corp, C-corp, and LLC structures and file the election when it makes sense.