Georgia S-Corp Pitfalls: The Net Worth Tax and the Form 600S-CA Consent Trap

Picture an Atlanta software consultancy set up as an S-corp. For years it had one owner, a Georgia resident, and its Georgia return was routine. Then the owner brings in a co-owner who lives in Florida and works remotely. At tax time the return will not file as a Georgia S-corp, because Georgia wants a signed promise from the Florida owner that never got collected. Instead of a clean pass-through, the company is now staring at a corporate tax bill on its full Georgia income. The owners here are theoretical, but the trap is real, and it shows up the moment an S-corp adds an owner from out of state.

Georgia recognizes your S-corp, but only conditionally

Georgia recognizes your federal S-corp election if the corporation has no nonresident shareholders, or if every nonresident shareholder signs a consent agreement, Form 600S-CA, promising to file a Georgia return and pay Georgia tax on their share of the income. Under O.C.G.A. §§ 48-7-21 and 48-7-27 and Georgia Rule 560-7-8-.34, if any one nonresident shareholder fails or refuses to sign, the Commissioner will not treat the company as a Georgia S-corp for that year.

Here is what that costs. When the consent is missing, the corporation loses its Georgia S-corp status for the year and files on Form 600, the C-corporation return, instead of Form 600S. Georgia then taxes the corporation itself at the 4.99% corporate rate on its Georgia taxable income, a layer of state tax the recognized S-corp never pays. The company is still a federal S-corp, so the income keeps flowing through on the owners' federal returns. Only Georgia's recognition is lost. This is not a penalty for late filing or an audit adjustment. It is the default outcome of one missing signature.

The fix is boring and cheap. Collect a signed Form 600S-CA from every nonresident owner and attach one for each of them to the Georgia return in the first year they hold stock, and again for any new nonresident who joins later. Georgia asks for the consent even when the company files a composite return on the owners' behalf. Build it into your onboarding for any new shareholder who lives outside Georgia, and the trap never springs.

The net worth tax nobody mentions

Owners like to say an S-corp pays no Georgia tax at the entity level because the income passes through. That is true for income tax, and false for the net worth tax. Georgia charges a net worth tax on corporations doing business in the state, and an S-corp is not exempt. Under O.C.G.A. § 48-13-70 and following, a corporation with net worth of $100,000 or less owes nothing, but above that the tax is graduated and tops out at $5,000 a year for net worth over $22 million. It is reported right on Form 600S alongside the income schedules.

For most single-owner service businesses the net worth stays under the $100,000 line and the tax is zero. It creeps in when the balance sheet grows, when retained earnings pile up, or when the company holds real estate or equipment. The amount is never huge, capped at $5,000, but it is a recurring entity-level charge that the sole proprietor version of the same business would not owe, and it is easy to forget until the notice arrives. An LLC that has not elected corporate or S-corp status is not a corporation for this tax, so the net worth tax is one more line item the S-corp election can switch on.

The upside: a PTET with no rate penalty

Georgia gives S-corps a genuine advantage that Texas and Florida owners cannot touch. Under HB 149, a Georgia S-corp can elect to pay tax at the entity level and deduct that payment federally, working around the IRC §164(b)(6) SALT cap that the IRS blessed for these regimes in Notice 2020-75. In earlier years Georgia set the pass-through entity tax at a flat 5.75%, above the individual rate, so electing meant paying a small premium for the federal deduction. That gap has closed. For 2026 the pass-through entity tax rate matches the flat 4.99% individual rate, so there is no rate penalty for electing. The election is made on Form 600S by the return due date including extensions and is irrevocable after that date.

One eligibility catch mirrors the federal rules. Only pass-through entities owned entirely by people who could be S-corp shareholders under IRC §1361 can make the Georgia election, so a company with a corporate or partnership owner is shut out. That rarely bites a real S-corp, which already has to meet the §1361 shareholder limits to hold its federal status, but it matters for partnerships weighing the same election. For the step-by-step, see our guide on how to make a Georgia PTET election.

So is the election worth it in Georgia?

Usually yes, and for the ordinary reason. If your business profit runs well above a reasonable salary, the federal self-employment savings on your distributions, cut under IRC §1401 and §1402, tend to clear the cost of payroll, an 1120-S, and the Georgia filings many times over. Georgia adds a second layer through the PTET at no rate penalty, and it takes little away. Georgia has a flat income tax rate of 4.99% for 2026, applied to both individuals and corporations. HB 463, signed on May 11, 2026, accelerated the state to 4.99%, down from 5.19% in 2025. The two things to watch are the ones the state does not remind you about: get a signed Form 600S-CA from every nonresident owner, and budget for a net worth tax if the balance sheet is heavy.

The federal savings still hinge on setting a defensible salary, which the IRS expects in every state. See our guide on S-Corp reasonable compensation for how to land on a number, and our note on the Social Security wage base for the single figure that decides how large the savings are. To put real numbers on your own situation, run the EntityIQ S-Corp tax calculator before you spend a dollar on payroll setup.

This article is educational and is not legal or tax advice. The figures above are 2026 amounts, and the owners are theoretical. Please consult a qualified CPA or enrolled agent before electing S-Corp status or filing a Georgia return.