California Business Portal

Is it true a corporation does not pay tax the first year?

Is it true a corporation does not pay tax the first year?

No, there is a misunderstanding that all corporations doing business in California are not subject to tax in their first tax year. Newly incorporated or qualified corporations are exceptions since they are not subject to the minimum franchise tax in their first year. They compute the tax for their corporation’s first tax year by multiplying their California net income by the appropriate tax rate and pay that amount. After the first year, corporations pay a franchise tax that is the larger of their California net income multiplied by the appropriate tax rate or the minimum franchise tax of $800. 

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