Advantages of Incorporating a Business in California
California’s economy is stronger and bigger than ever before and has a GDP of $2.3 trillion. The state is home to 20 of the top 130 companies in South and North America. Hence, if you have thought of forming a startup company California then it is the best choice you can ever make.
The economic and growth prospects that the state of California offers are just some of the advantages. Once you register a new business in California, you will be able to benefit from some of the flexibility in regulations and taxes that the state provides. Here’s a list of some of the advantages of a California corporation.
Advantages that drive New Business Formation
There are several advantages that you can enjoy when we help you register a new business in California. Some of them include:
Advantage#1 – Tax Flexibility
Whether you set-up a closed corporation or a general stock corporation, you can leverage on the significant tax advantages like:
Capital Gains Exemption
The capital gains exemption is applicable for shares of small business corporations only when they qualify for the same.
Small business tax
After you register a new Company in California or post incorporation, you will be able to access corporate small business tax rates. Different provinces in the state also offer low corporate tax rates especially on small business income.
Advantage#2 – Multiple Benefits
When you register a new company in California, you can benefit from the following advantages:
- Shareholders of a California corporation enjoy limited liability for the debts or any judgments against the corporation.
- Shareholders of a California corporation can only be held accountable if they have investment in stock of the corporation.
- A California corporation will always be able to raise any additional funds if required through the process of sales of stock.
- Once you register a new Company in California, it is in the form of a C Corporation. You can change it to an S Corporation if specific requirements are met. This shift to S corporation will enable your company enjoy the same tax rates as a partnership does.
- A California corporation provides anonymity to the owner.
- The LLC as well as incorporation filing fee in California is lesser than that of Connecticut, District of Columbia, and even Delaware.
There are several other advantages that vary according to the type of startup company in California you want to establish like partnership firms, foreign corporations, LLC etc.
Are there any Disadvantages of Incorporating in California?
If you want to register a new business in California, it is one of the best decisions you can take. There are several advantages and a handful of disadvantages. One of the disadvantages is that the state charges a minimum of $800 as “franchise tax” for any business. Since, Corporations in California are monitored by the state, local, and federal agencies, there is more paperwork to be done and it has to be ensured that all documents are in compliance with state regulations.
The only thing that really matters when it comes to incorporating a startup company in California is that the advantages outweigh the disadvantages. California is a state that promotes long-term business growth and that is one of the greatest benefits for any corporation.