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4275 Executive Square Suite 200
La Jolla, CA 92037
(858) 754-8277
NATALIE C. PAPAGNI, CPA
Tax, Planning & Advisory Services
A Different Kind of CPA Firm
Serving
High-Income Earners, Physicians, Entrepreneurs & Privately-Held Companies
That Expect & Deserve More.
S-CORPORATIONS
Reduce Self-Employment Tax. Build Wealth.
S-corporation & shareholder tax planning for California Shareholders
CPA & Tax Strategist
for
S-corporations & Shareholders
La Jolla, Greater San Diego & California
Natalie C. Papagni, CPA - Tax, Planning & Advisory Services helps clients understand the unique benefits and administrative requirements of operating an S-corporation or a Limited Liability Company (LLC) taxed as a S-corporation.
We model the numbers, providing you a clear understanding of the tax implications and benefits, so you can make an intentional decision when evaluating if an S-corporation entity structure or S-corporation election is the best fit for you.
You will work closely with Natalie C. Papagni, CPA to assist architect a well-thought-out strategy to place you on a path to achieve the financial future you envision, and deserve, in full compliance with federal and state tax laws - with confidence and clarity.
Where the Benefit Comes From
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Self-employment tax savings on distributions, documented defensibly
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California PTET election and the SALT-cap workaround
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Solo 401(k) plus profit-sharing and cash-balance layering
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QBI §199A optimization within the structure
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Reasonable compensation analysis anchored to market data
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Clean shareholder basis, AAA, and distribution planning
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First-year setup done right — Form 2553, payroll, filings
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Multi-state registration, nexus, and apportionment
Is an S-corporation Right for You?
The Self-Employment Tax Arbitrage →
Reasonable Comp for S-Corporation Shareholders:
Avoiding Token Salary Structures →
Electing S-Corporation Status:
Timing, Traps & Late Election Relief →
Understanding Your K-1
A Line-By-Line Guide to Form K-1 →
S-Corporation Foundation Package:
Questions Owner-Entrepreneurs Have When Considering Forming an S-Corporation
Ask Us.
Will I benefit from an S-corporation election? What are common shareholder benefits?
What are the downsides of operating as an S-corporation?
Why do I have to take a reasonable salary?
Why is tracking basis important, and how does basis govern cash I can withdrawal from the business?
Can I add my vehicle to the business financial statements?
When can I buy a vehicle and write off the vehicle in full the first year?
Why are some shareholders not able to deduct benefits paid to a > 2% shareholder? How can this be avoided?
How do I elect the California PTET tax?
How do I know if optimizing QBI is better than electing the CA PTET?
Questions Shareholders of Existing S-corporations Frequently Ask
Ask Us.
My prior preparer made errors on my s-corporation & personal returns. Is Natalie C. Papagni, CPA able to amend the returns?
I earn revenue from both products and services — should those sit in one entity or be separated?
Should I set up a holding company, and what would it actually accomplish for me?
Does a holding-company or multi-entity structure lower my taxes, protect my assets, or both — and is it worth the added complexity and cost?
I've built up real estate — should it live inside my S-corporation or in a separate LLC, and why does that choice matter so much?
Should a second business line be its own entity, or a division of the one I have?
If I own more than one entity, how do management fees, intercompany charges, and cost-sharing need to be handled to hold up under scrutiny?
Would an S-corporation, LLC, or a combination serve my structure better as I grow?
Is my salary still reasonable now that my income has grown, and how does that interact with my QBI deduction?
Am I capturing every retirement deduction available?
Should the California PTET election be part of my plan every year, and how do I the PTET across multiple entities?
Now that profits are accumulating, what's the most tax-efficient way to move cash out — to me, or into another entity I own?
Should my spouse or family members be on payroll or own shares, and does it genuinely help?
Am I coordinating my business and personal returns to minimize my total tax liabilities?
Schedule a Consult
Natalie C. Papagni, CPA - Tax, Planning & Advisory Services
Frequently Asked Questions (FAQs)
How much can an S-corporation save in California?
For a business with $100,000 + net income, many owner-entrepreneurs find payroll tax savings and additional benefits of an s-corporation election attractive. Layered retirement plans, the California PTET election, the QBI deduction, home office, business vehicle expense deductions, depreciation strategies and other opportunities exist to help minimize taxes, and optimize the benefits of business ownership.
When does an S-corporation election make sense vs. staying a sole proprietor or LLC?
For a business netting around $100,000 + in net income, many owner-entrepreneurs find the payroll tax savings of an S-corporation election attractive — and the election is often just the beginning. Unlike sole proprietorships, an S-corporation an take advantage of the California PTET election. In addition, S-corporation shareholders with adequate shareholder basis are able to take distributions - free of payroll tax. While an S-corporation is not right for everyone, may find an S-corporation allows them to optimize the benefits of business ownership.
Can a physician use an S-corporation for locums or private practice income in California?
Yes — at the right income level. California physicians with consistent 1099 locums or private practice income above $100,000 +/- often find an S-corporation election attractive: payroll tax savings on distributions, a Solo 401(k) funded through W-2 compensation on top of any hospital 403(b)/457(b) plans, and the California PTET election. Below $100,000, many physicians find the state's franchise tax, payroll, and compliance costs and administrative burdens not worth the savings. As such, we find running a comparative analysis essential prior to recommending the election. * Note that California requires licensed physicians to operate through a professional medical corporation, which then makes the S election.
What is a reasonable salary for an S-corporation owner in California?
Reasonable compensation generally reflects market-based wages for services actually performed by shareholder-employees. The IRS closely examines situations where shareholder distributions substantially exceed W-2 compensation, particularly in highly profitable businesses. Factors considered may include industry standards, duties performed, geographic region, hours worked, training, collections generated, and comparable compensation data. Proper analysis and documentation help reduce audit exposure.
What is an accountable plan and and why does every S-corporation need one?
An accountable plan is an IRS-sanctioned reimbursement arrangement that allows a business to reimburse shareholder-employees for qualifying business expenses - home office, business mileage, internet and mobile phone use, travel, and more - without treating the reimbursements as taxable wages. Without a properly structured plan, those same reimbursements are W-2 income.
How do I plan a tax-efficient exit from my S corporation?
Exit planning starts years ahead: cleaning up basis records, evaluating asset versus stock sale structures, considering personal goodwill allocations, timing the transaction around income and PTET elections, and — in California — planning for the state tax bite on the gain. Whether the exit is a third-party sale, associate buy-in, or wind-down, early structuring drives the after-tax result.
How do I plan a tax-efficient exit from my S corporation?
Stock and debt basis determine whether S-corporation losses are deductible and whether distributions are tax-free. Distributions in excess of basis are taxed as capital gain, and losses beyond basis are suspended. The IRS now requires Form 7203 whenever shareholders claim losses, receive distributions, or dispose of stock. Accurate, year-by-year basis schedules are essential — reconstructing basis years later is expensive and often imprecise.
How can S-corporation owners maximize the QBI deduction?
The Section 199A qualified business income deduction allows up to a 20% deduction on pass-through income — but physicians and other specified service businesses face a complete phase-out at higher taxable income levels. For SSTB owners, the planning objective is managing taxable income beneath the thresholds: retirement plan contributions and PTET payments are the primary levers. Salary calibration adds a second dimension — owner wages reduce qualified business income but also support the W-2 wage limitation that applies at higher incomes. The right balance is individualized, and it changes as income grows.
Does an S-corporation owe taxes in more than one state?
If the corporation has nexus — employees, property, or revenue exceeding a state's economic nexus threshold — it may owe tax and apportion income across states. Owners may then face nonresident filing obligations, composite return options, and PTET regimes that vary state by state. Multi-state S-corporations need coordinated entity and individual planning to avoid double taxation and capture resident-state credits for taxes paid elsewhere.
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