California LLC vs. an S Corporation: Which is Better? There is a challenge when considering what entity to operate through in California. Both an S Corporation and LLC are flow through entities. The challenge is that California treats these entities differently at the state level. Here is a general rule of thumb found in a tax planning guide: S corporations that are doing business in California must pay a 1.5% net income tax. LLCs are not subject to this tax, but must pay an entity-level fee based on gross receipts. If the business operates at a loss, the corporation form is generally preferable. If the entity operates at a profit, then the LLC will generally result in the lesser tax liability.
Posted on: Thu, 30 Oct 2014 16:00:52 +0000
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