California, New York City Additional Taxes
S corporations pay a franchise tax of 1.5% of net income in the state of California (minimum $800). This is one factor to be taken into consideration when choosing between a limited liability company and an S corporation in California. For highly profitable enterprises, the LLC franchise tax fees (minimum $800), which are based on gross revenues, may be lower than the 1.5% net income tax. Conversely, for high-gross-revenue, low-profit-margin businesses, the LLC franchise tax fees may exceed the S corporation net income tax.
In New York City, S corporations are subject to the full corporate income tax at a 8.85% rate. However if the S corporation can demonstrate that a portion of its business was done outside the city, that portion will not be subject to the additional tax.
Read more about this topic: S Corporation, Taxation Issues
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