tax of 1.5% of net income in the state of California (minimum $800). This is one factor to be taken into consideration when choosing between a limited liability company and an S corporation in California. For highly profitable enterprises, the LLC franchise tax fees (minimum $800), which are based on gross revenues, may be lower than the 1.5% net income tax. Conversely, for high-gross-revenue, low-profit-margin businesses, the LLC franchise tax fees may exceed the S corporation net income tax. Delaware S Corporations operating in the City of Wilmington are not subject to the city's 1.25% net profits tax, however, S corporation employee wages are subject to the city's 1.25% wage tax. New York City In New York City, S corporations are subject to the full corporate income tax at an 8.85% rate. However, if the S corporation can demonstrate that a portion of its business was done outside the city, that portion will not be subject to the additional tax. Philadelphia In Philadelphia, S corporations are subject to the city's income tax (6.35%) and gross receipts tax (1.415%), but not the net profits tax (3.8907%). S corporations also benefit from Pennsylvania's flat personal income tax of 3.07% instead of the high corporation tax rate of 9.99%. References External links Choose a Business Structure—U.S. Small Business Administration Instructions for Form 1120S—U.S. Internal Revenue Service 26 CFR 1.1368-2 - Accumulated adjustments account (AAA)—Legal Information Institute Corporate taxation in the United States Types of business entity