Entity Selection Consultant for California Businesses - Run the Math Before You File Anything
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LLC vs S corp in California: what each one actually changes
Three structures, three different jobs. Here's the honest version - the one that includes California's fees.
Staying a sole proprietor
The default you're already in. Simplest and cheapest to run - no state filings, no separate return - but every dollar of net profit pays the full 15.3% self-employment tax, and there's no liability wall between the business and your house. Below roughly $70,000 of net income, this plus good records is often the honest winner.
Forming an LLC
A legal container, not a tax strategy. By default a single-member LLC changes nothing about your taxes - same Schedule C, same self-employment tax. What it buys is liability separation and, in California, an $800-a-year franchise tax for the privilege. Worth it when there's something to protect; a common thing to buy when there isn't.
Electing S corp status
A tax election, not a different entity - an LLC or corporation taxed as an S corp. You pay yourself a reasonable salary, which pays payroll tax, and take the rest as distributions, which don't. That split is the whole savings - roughly $1,000-$2,000 a year at first, $10,000 and up past $300,000 of net profit, net of the payroll and second return it costs to run. Net-positive around $48,000, comfortably so from $70,000.
Generic thresholds are where the internet stops. Run your numbers in the free entity selection calculator - about three minutes, no email - or bring them to a free consultation and we'll do it live.
Beyond the filing
Business formation with tax strategy built in
A filing website's job ends when the state accepts the paperwork. That's roughly where the actual work starts.
- Entity analysis on your real numbers. Sole proprietor vs. LLC vs. S corp, side by side, on your income - the comparison above, personalized. Decided before anything is filed.
- California formation, done completely. Articles filed with the Secretary of State, EIN obtained, initial Statement of Information calendared and filed - the follow-up filings the mills leave as your surprise homework.
- The S corp election, timed right. Form 2553 prepared and filed - at formation, at the start of the year the math says to switch, or late with relief when the deadline already passed (next section).
- A first-year compliance calendar, built and calendared for you. The $800 franchise tax and its first-year timing quirk, the Statement of Information and its renewal cycle, your S corp election effective date, your first 1120-S due date, and your estimated-payment schedule - dated, in writing, with a reminder before each one. Payroll set up with a provider that fits your size, and your bookkeeping started clean instead of reconstructed later.
- A structure check-in at twelve months. Booked at setup, not left to memory. Income moves fastest in year one, and the entity that fit at $60K often doesn't at $160K. If nothing changed, it's a five-minute call. Clients on a tax preparation or bookkeeping engagement get the structure math re-run every year as part of the relationship, not as a new engagement.
Formation is a one-time project; the structure is a living decision. We're built for the second thing - see how it connects to tax preparation →
Missed the deadline?
Late S corp elections: usually fixable, rarely fun to Google
The S corp election is due within 2 months and 15 days of the start of the tax year you want it for - a deadline most people learn about after missing it. Here's what the panic-search won't tell you plainly: the IRS grants late S corp election relief routinely under Rev. Proc. 2013-30 when you qualify - generally up to 3 years and 75 days back, with a reasonable-cause statement that has to be written correctly the first time. We prepare late elections for California businesses as standard work: the relief request, the reasonable-cause narrative, and the FTB side of the story, handled together.
One honest caveat: relief is normal, not automatic. On the free consultation we'll tell you in plain terms whether your situation qualifies - and if it doesn't, what the next-best move is (usually a clean election for next year, which still captures most of the value).
Missed quarterly payments or unfiled years tangled into the same mess? That's tax preparation's rescue lane → - same advisor, one plan.
How much does an S corp election cost in California?
The honest answer has three layers, and anyone quoting you only the first one is selling paperwork:
Our fee: flat, quoted first. Formation on its own from $595, and the full setup - analysis, formation, the S corp election and the year-one calendar - from $895, plus state fees. Exact quote in writing after the free consultation, before anything is filed.
California's costs (everyone pays these, whoever files): $70 to the Secretary of State for the Articles of Organization, $20 for the Statement of Information within ninety days, and the $800 annual franchise tax - plus, for S corps, the 1.5% tax on net income (minimum $800). One timing point: SB 122 cuts the first-year annual tax to $400 for an LLC, LP or LLP whose first taxable year begins in 2027 through 2029, so forming in January rather than December is worth $400 if you are not electing S corp treatment.
The $800 and the Statement of Information both carry due dates, and both sit in the 2026 California tax calendar alongside everything else that falls due this year.
The S corp's running costs: a payroll service (our calculator budgets $900 a year, and a full-service provider can run double that once workers' comp and the quarterly filings are in), a separate 1120-S return, and a bit more bookkeeping discipline. That overhead is why the election turns net-positive around $48,000 of net income on our figures but only comfortably so from about $70,000 - and why it makes so much sense well above it.
When we run your numbers, the recommendation includes all three layers - so the "savings" are the real kind, net of everything.
Your entity selection consultant here is also the person who files what he recommends
Entity selection at TrueArc is run by Amid Kobakival, the founder - more than a decade in tax and accounting, including training at Crowe LLP, a top-10 U.S. accounting firm, preparing and reviewing returns across every major entity type. That breadth is the qualification that matters here: the person recommending your structure has personally prepared the 1120-S, the 1065, and the Schedule C that each choice leads to, and knows what each one costs to live with.
CTEC-Registered Tax Preparer · Authorized IRS e-file Provider · QuickBooks Certified ProAdvisor, Levels 1 & 2 · B.A. Economics, UCLA
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Entity selection and business setup questions, answered straight
How long does it take to set up an LLC or S corp in California?
The analysis takes one conversation. After that: California Secretary of State processing runs days to a few weeks depending on filing method and season, the EIN is same-day, and an S corp election filed with the IRS takes effect per its dates rather than its processing time. Practical version: start to finish is typically measured in weeks, and the sequencing matters more than the speed – which is the part we handle.
Do I need an LLC before I can elect S corp status?
You need an eligible entity, an LLC or a corporation, because the S corp isn’t an entity at all; it’s a tax election that sits on top of one. This is the single most common confusion we untangle: “becoming an S corp” for most self-employed Californians actually means “form an LLC, then elect S corp taxation for it.” One exception matters a great deal if you hold a professional license. California Corporations Code section 17701.04(e) bars an LLC from rendering professional services, so a chiropractor, a therapist, a physical therapist or any other licensee under the Business and Professions Code forms a professional corporation instead and elects S corp treatment on that. One engagement covers both, in the right order.
What is the deadline for an S corp election?
Within 2 months and 15 days of the start of the tax year you want the election for, which is March 15 for a calendar-year business, or the next business day when March 15 falls on a weekend. For 2026 that made it Monday, March 16. For a new entity, the clock starts at formation. Missed it? Late relief exists and is granted routinely when you qualify: see late S corp elections above.
Can I switch from sole proprietor to S corp in the middle of the year?
Yes – the common path is forming the entity mid-year and electing S corp status from the formation date, so the year splits: Schedule C for the sole-proprietor months, 1120-S from formation on. It’s routine, but the payroll and estimated-payment mechanics have to be set up at the switch, not discovered in April – that first-year coordination is most of the value of doing it with an advisor.
My LLC was suspended by the Franchise Tax Board. Can you fix it?
Usually, yes. FTB suspension is almost always unfiled returns, unpaid $800 franchise taxes, or a missed Statement of Information – the fix is filing the back returns, paying or arranging the balances, and submitting the revivor request. We handle the returns and the revivor together, and the earlier you start, the fewer contracts and bank relationships the suspension quietly breaks in the meantime.
Will you tell me if I don't need an entity at all?
Yes, and it’s a common outcome. Below the income threshold, a sole proprietorship with clean books and the right deductions often beats an LLC that costs $800 a year to exist. We sell the analysis, not the entity: the recommendation is the product, and “stay exactly as you are, revisit at $70K” is a recommendation we give regularly.
Get the structure question answered - free, in fifteen minutes
Bring a rough figure for this year's income - that's genuinely all the preparation the call needs. You'll leave knowing which structure the math favors on your numbers, what it costs to set up and to run, and the flat fee if you want it handled. And if the honest answer is "you don't need us yet - revisit at $70K," you'll leave with that instead, no follow-up pressure.
Or call (818) 297-4579 · email contact@truearctax.com
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