California contractors: see what an S corp could save you.
As a sole proprietor, you pay 15.3% self-employment tax on nearly every dollar of profit. An S corp limits that tax to the salary you pay yourself. Enter your profit and see your estimate in seconds.
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S corp savings calculator
For licensed California contractors running as a sole proprietor.
Your estimated yearly savings
$0/yrGet your full breakdown
See the salary, distribution, and California tax behind your number. We’ll also send it to you.
- Net profit
- Suggested salary
- Distribution
- Self-employment tax saved
- California S corp tax (1.5%, $800 min)
- Payroll and filing costs
- Estimated savings
Got it. Want to go over these numbers with us? Book a free Zoom call or call (800) 659-1207.
This is a simplified estimate for education, not tax, legal, or accounting advice. Your real savings depend on your full tax situation, a reasonable salary for your work, and current IRS and California FTB rules. Talk to a licensed CPA before electing.
3 reasons California contractors switch to an S corp
Here’s what changes when you move from a sole proprietor license to a corporation that elects S corp tax status.
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You stop paying 15.3% on every dollar.
As a sole prop, self-employment tax hits almost all of your profit. With an S corp, you pay yourself a reasonable salary through payroll. Only that salary carries Social Security and Medicare tax. The rest comes out as a distribution, without the 15.3%.Example: on $150,000 of profit, a sole prop pays about $21,200 in self-employment tax. With a $70,000 salary, payroll tax is about $10,700. That’s roughly $10,500 less, before the costs of running the corporation.
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Your house and savings stop riding on every job.
A sole proprietor and the business are the same person. A corporation is a separate legal entity, so when it’s set up and run properly, business debts and claims stay with the business instead of your personal assets. In California, a corporation is also the cleaner choice than an LLC for contractors: CSLB requires LLCs to carry an extra $100,000 worker bond and $1 million to $5 million in liability insurance.
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You bid like a company, not a guy with a truck.
“Inc.” on your bids, contracts, and trucks tells homeowners, general contractors, and commercial clients you’re built to last. A corporation also lets you build business credit, open business accounts in the company’s name, and keep the books clean enough for bigger jobs and lenders.
Sole prop vs. LLC vs. S corp for California contractors
Most contractors compare these three. Here’s how they stack up on the things that cost you money.
| Sole proprietor | LLC | Corporation + S election | |
|---|---|---|---|
| Self-employment tax | On nearly all profit | On nearly all profit, unless it elects S corp | Only on your salary |
| Separates business and personal liability | No | Yes | Yes |
| Extra CSLB requirements | None | $100,000 worker bond plus $1M–$5M liability insurance | None beyond the standard license bond |
| California entity tax | None | $800 minimum plus a fee based on gross receipts | 1.5% of net income, $800 minimum |
| Payroll for the owner | Not needed | Not needed | Required (we set it up) |
An S corp usually starts to pay off once your profit is steady around $60,000 to $80,000 or more. Below that, payroll and filing costs can eat the savings. The calculator above shows where you land.
- License no.
- 1104582
- Status
- Active
- Phone
- (408) 555-0187
- Address of record
- 418 Quail Run Ct., San Jose, CA 95125That’s your house.
Illustration. The business, license number, and address are made up.
Incorporating puts your address on two public records.
Your new corporation gets its own license and its own state filings. Most contractors type their home address into both. Here’s what that means.
- The new license is public.CSLB shows the corporation’s address of record to anyone who searches your name or license number.
- So is the corporation.Secretary of State filings are public records, addresses included.
- Data sites copy both.Your address gets scraped and republished on sites you’ve never heard of.
- The fix is easiest before anything goes on record.We’ll talk through business address options on your strategy call, so your home stays off public records.
Why plan with Contractor License Now
Generic tax advice misses how contractor rules change the math. We’re the contractor school that’s helped Californians get licensed for 15 years, so we plan around the parts other advisors skip.
We know the CSLB rules.
Your business structure changes your license, bond, and insurance requirements. We factor those in, so your tax plan never creates a licensing problem.
Tax help that doesn’t stop at one call.
When you need payroll, bookkeeping, or tax prep, our sister team at Alcom Tax is already in your corner, so your plan keeps working all year.
A family business that picks up the phone.
You talk to the same small team the whole way, in English or Spanish. No call centers, no chatbots, and straight answers about whether an S corp actually makes sense for you.
How the strategy call works
Run your numbers
Use the calculator, then we confirm your estimate on a short call.
We review your real numbers
On a free 30-minute call, we check your estimate against what you actually made.
You get a clear plan
Which structure fits, a reasonable salary range, and how contractor rules affect your choice.
You decide what’s next
If an S corp makes sense, we can help you get set up. If it doesn’t yet, we’ll tell you.
Plan your 2027 taxes now.
If an S corp fits, starting at the beginning of the year keeps your books simple: one full year under one tax setup, no mid-year split.
Changes for contractors take time, because licensing rules come into play. That’s why year-end is the best time to look at your numbers.
What you get on the strategy call
- Your calculator estimate checked against your real numbers
- A reasonable salary range for your trade and profit
- Sole prop vs. LLC vs. S corp, with the CSLB rules for each
- A 2027 timeline: what to do before and after January 1
- Business address options to keep your home off public records
- Next steps for payroll, bookkeeping, and tax prep
S corp tax planning for contractors across California
Bay Area contractors
Bay Area jobs bill high, so profits pass the S corp break-even fast, and so does the self-employment tax. We work with contractors in San Jose, San Francisco, Oakland, Fremont, Hayward, Santa Clara, Sunnyvale, San Mateo, Walnut Creek, Concord, and across the South Bay, East Bay, and Peninsula.
Southern California and statewide
From our home base in the Inland Empire, we help contractors in Riverside, Temecula, Corona, Orange County, Los Angeles, San Diego, and everywhere in between. We meet by phone or Zoom, wherever you work. Not licensed yet? Check your eligibility.
Free · 30 minutes · on Zoom
Book your tax strategy call.
Pick a time below. You’ll get a Zoom link by email and a reminder before we meet. No pressure, no pitch deck, just your numbers.
- Your real numbers. We check the calculator estimate against what you actually made.
- A straight answer. If an S corp isn’t worth it for you yet, we’ll tell you.
- Your timeline. What to do before and after January 1.
- English or Spanish. Pick your language right on the calendar.
You’ll talk with our family team, the same people who’ve trained 10,000+ California contractors. Not a call center.
Rather talk now? (800) 659-1207
En español: (951) 704-0002
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S corp questions from California contractors
How much profit do I need before an S corp makes sense?
For most contractors, the savings start to beat the extra costs once net profit is steady around $60,000 to $80,000 or more. Below that, payroll, the $800 California minimum tax, and the extra tax return can cancel out the savings.
Can I keep my current CSLB license?
Your sole owner license doesn’t transfer to a corporation. The corporation applies for its own license, and you can usually act as its qualifier. Planning the timing ahead keeps you from ever working without an active license.
Should I form an LLC or a corporation?
For California contractors, a corporation with the S election is usually the better fit. CSLB requires licensed LLCs to carry a $100,000 worker bond and $1 million to $5 million in liability insurance, which corporations don’t need.
What is a “reasonable salary”?
The IRS expects S corp owners who work in the business to pay themselves a salary that fits the work they do. You can’t set it at zero to dodge payroll tax. We give you salary guidance and a CPA referral so your number holds up.
What does California charge an S corp?
California charges S corps 1.5% of net income, with an $800 yearly minimum. A sole proprietor doesn’t pay this, so the calculator subtracts it from your estimate.
Is an S corp legal and safe?
Yes. The S corp election is a standard IRS tax status used by millions of small businesses. The main rule is to run it properly: real payroll, a reasonable salary, and separate business accounts.
Every month as a sole prop costs you self-employment tax.
Run your number, grab a time, and let’s see if 2027 is your first year as an S corp.
