What Are the Costs Involved in Starting an S Corp in California?

Filing Fees for an S Corp in California

The first step in forming an S corp is filing articles of incorporation with the California Secretary of State. The filing fee for articles of incorporation is currently $100 for standard processing and $750 for expedited processing. Additionally, there may be fees associated with obtaining an Employer Identification Number (EIN) from the IRS, which is typically free but can involve some paperwork.

Legal Services for Setting Up an S Corp

Engaging legal services is often necessary to ensure that your S corp is properly set up and compliant with state and federal regulations. Legal fees can vary widely depending on the complexity of your situation and the attorney's rates. On average, you might expect to pay anywhere from $500 to $2,000 or more for initial setup and ongoing legal advice.

Accounting and Tax Preparation Costs

Accounting services are essential for managing the financial aspects of your S corp. This includes preparing financial statements, handling payroll, and ensuring compliance with tax laws. The cost of accounting services can range from $1,000 to $5,000 annually depending on the complexity of your financial situation and the level of service required.

Ongoing Compliance Expenses for an S Corp

Once your S corp is established, there are ongoing compliance expenses that you'll need to consider. These include annual franchise tax payments (which can range from $800 to $11,450 based on net income), annual report filings ($25), and potential penalties for non-compliance.

Other Costs Associated with Starting an S Corp

Other costs associated with starting an S corp include business licenses and permits (which can vary by industry), insurance premiums (liability insurance is often recommended), and any necessary equipment or software purchases.

Summary of Costs Involved in Starting an S Corp

In summary, while there are several costs involved in starting an S corp in California, understanding these expenses upfront can help you plan more effectively and avoid potential pitfalls down the line.