CPA for Startups in Los Angeles

Situations We Handle

A Delaware C corporation with its team in Los Angeles. A corporation is doing business in California when it engages in any transaction for financial gain in the state, is organized or commercially domiciled here, or passes the 2025 thresholds of $757,070 of California sales, $75,707 of California property or $75,707 of California payroll, or 25 percent of its total in any of them. It registers with the California Secretary of State on a Statement and Designation by Foreign Corporation for $100 and files a Statement of Information for $25 within 90 days of registering and every year after. It files Form 100 by the 15th day of the 4th month after its year end and pays 8.84 percent of its California income or the $800 minimum franchise tax, which a corporation incorporated or qualified on or after January 1, 2020 does not pay in its first taxable year and after that owes whether it is active, inactive or operating at a loss. The federal Form 1120 is due on the same day and taxes income at 21 percent. Delaware's annual report and franchise tax are the corporation's own filing with the Delaware Division of Corporations, due March 1: a $50 report fee, a minimum tax of $175 under the authorized shares method or $400 under the assumed par value capital method, a $200,000 maximum, and a $200 penalty plus 1.5 percent interest a month when late. We prepare Form 1120 and Form 100 from the books, with Schedule L tied to the balance sheet. See Business Tax Preparation.

Books an investor can read. Monthly bookkeeping gives a startup reconciled bank and card accounts, a profit and loss statement and a balance sheet for each month, and the year-to-date totals for Form 1099-NEC, which is required for payments made in 2026 once a contractor receives $2,000 or more in the year. Start-up and organizational costs are treated separately from operating expenses: a limited amount may be deducted in the year the business begins, and the remainder is amortized over 180 months. When the records are behind before a financing round or the first return, catch-up bookkeeping from $1,500 brings them current first. See Bookkeeping and Catch-Up Bookkeeping.

The research credit before there is revenue. The federal credit on Form 6765 is 20 percent of qualified research expenses over a base amount, or 15.8 percent when the company elects the reduced credit under section 280C. A qualified small business, a corporation or partnership with gross receipts under $5 million for the year and no gross receipts in any tax year before the five-tax-year period ending with the credit year, may elect to apply up to $500,000 of the credit against the employer's payroll taxes, claimed on Form 8974 with Form 941. For tax years beginning after December 31, 2024, domestic research and experimental expenditures are deductible under section 174A in the year paid, or the company may elect to capitalize them. California's credit on form FTB 3523 is 15 percent of qualified research expenses over the base amount, plus 24 percent of basic research payments for corporations, for research conducted within California; from 2025 California also allows the alternative simplified credit at 3 percent of expenses over 50 percent of the prior three-year average, and business credits are capped at $5,000,000 for tax years 2024 through 2026. We compute the credit on Form 6765 with the return from the expense records in the books and, when the payroll election is made, carry it to Form 8974 with the quarterly Form 941. See Payroll.

Founders' stock: the 83(b) election and qualified small business stock. A founder who receives stock still subject to vesting may choose to include its value at the time of the transfer, minus anything paid for it, in income for that year; the election is a written statement or Form 15620 filed with the IRS no later than 30 days after the transfer, and it cannot be revoked without the consent of the IRS. Gain on qualified small business stock, stock of a C corporation acquired at its original issue when the corporation's gross assets were $50 million or less before and immediately after the issue and held for more than five years, is excluded at 100 percent for stock acquired after September 27, 2010, limited per issuer to the greater of 10 times the basis or $10 million. For stock acquired after July 4, 2025 the exclusion is tiered by holding period, with partial exclusions of 50 percent at three years and 75 percent at four years and 100 percent at five years or more, and the per-issuer limit rises to $15 million. California does not conform to either rule: the whole gain goes on Schedule D (540) and is taxed as ordinary income. We keep each founder's election in the return file, track the acquisition date and basis of the shares, and report a sale on both returns. See Tax Planning.

Payroll for founders and the first hires. The corporation registers with the EDD as an employer within 15 days of paying more than $100 in wages in a calendar quarter, reports federal payroll taxes on Form 941 by April 30, July 31, October 31 and January 31, and files the DE 9 and DE 9C with the EDD by the same dates. Federal withholding on a bonus can be figured at a flat 22 percent, 37 percent above $1 million in a calendar year, and California withholding on bonuses and stock options at a flat 10.23 percent. We run the payroll, file the quarterly returns and prepare the W-2s, and attach Form 8974 when the research credit is applied against payroll tax. See Payroll.

The founders' own returns. A founder paid a salary files an individual return with W-2 income and the California return, $650–$900. A founder who exercised options, sold shares or worked in several states during the year files the return with K-1s, stock compensation or several states, $2,500–$4,500; the stock pieces are explained on Executives with Stock Compensation. Estimated payments apply once a founder expects to owe $1,000 or more of federal tax, or $500 of California tax, paid 30, 40, 0 and 30 percent on April 15, June 15, September 15 and January 15. See Individual Tax Preparation.

A California LLC or S corporation instead. A company that is not raising venture capital often starts as a California LLC or S corporation, from $950 plus state fees, with the $800 LLC annual tax or the 1.5 percent S corporation tax from the first year. The comparison, the filing and the first-year dates are set out on LLC or S Corporation in California and CPA for New Businesses.