Navigating California Tax Laws for Small Businesses

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Navigating California Tax Laws for Small
Businesses
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Business Entity Types

• Sole Proprietorship As a sole proprietor, you
  report business income and expenses on your
  personal tax return (Form 1040).
• Partnership Partnerships file an information
  return (Form 565) to report income, deductions,
  and credits, but they don't pay income tax at the
  entity level.
• Limited Liability Company (LLC) LLCs in
  California are subject to an 800 annual tax and
  a gross receipts fee.
• Corporation C-corporations and S-corporations
  have different tax treatment. C-corps pay
  corporate income tax, while S-corps pass income
  through to shareholders' personal tax returns.

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Sales and Use Tax
In California, businesses must collect and remit
sales tax on taxable goods and certain services.
The current statewide sales tax rate is 7.25,
but additional district taxes may apply, making
rates vary by location. It's essential to
register for a seller's permit with the
California Department of Tax and Fee
Administration (CDTFA) if you plan to sell
tangible goods.
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Employment Taxes
If you have employees in California, you must
withhold state income tax, federal income tax,
and FICA (Social Security and Medicare) taxes
from their wages. Additionally, employers must
pay state unemployment insurance (UI) tax and
employment training tax (ETT).
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Franchise Tax
California imposes an annual franchise tax on
corporations and LLCs for the privilege of doing
business in the state. The minimum franchise tax
is 800 per year for LLCs and corporations,
regardless of income. Corporations also pay a
corporate income tax based on their net income.
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Best Accounting Services in California
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