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To form an S Corp in California, you must file Form 2553 (Election by a Small Business Corporation) with the IRS and then complete additional requirements with the state of California, including filing articles of incorporation, obtaining licenses and permits, and appointing directors.
The 60/40 rule is a simple approach that helps S corporation owners determine a reasonable salary for themselves. Using this formula, they divide their business income into two parts, with 60% designated as salary and 40% paid as shareholder distributions.
Some business owners wonder, "Am I considered self-employed if I own an S Corp?" Owners of S Corporations are "employed by" the S Corporation and receive a salary. This means that strictly speaking, you are not self-employed since you're considered an employee of the company.
All California S corporations and LLCs companies treated as S corporations for federal, should file Form 100S (California S Corporation Franchise or Income Tax Return).
You must file online and pay the $50 filing fee. The SOS will process the Articles of Incorporation usually within 24 hours. Once your corporation is formed, you will need to obtain an Employer Identification Number from the IRS.
To form a Colorado S corp, you'll need to ensure your company has a Colorado formal business structure (LLC or corporation), and then you can elect S corp tax designation. If you've already formed an LLC or corporation, file Form 2553 with the Internal Revenue Service (IRS) to designate S corp taxation status.
member LLC can be taxed as an S Corporation if it meets the IRS's eligibility criteria. In fact, both singlemember and multimember Limited Liability Companies can elect to be treated by the IRS as either an S Corporation or a C Corporation if they meet the requirements.
Can I set up an S corp myself? While it is possible to file articles of incorporation and go through the S corporation election process alone, S corp requirements are both strict and complex. To ensure you're following the rules, we recommend consulting an attorney or tax professional.