Starting a California Corporation
If you are planning to register a corporation in California then there is a process that you will have to follow and also be compliant with the various state requirements and regulations. The process has several steps right from identifying and reserving a business name to filing the articles with the office of the California Secretary of State.
1. Name your Corporation
A name is one of the most defining aspects of any form of business entity as it creates an identity that prospective customers can relate to and also increase brand recall value. It is mandatory to have a business name in order to register a corporation in California. When identifying or choosing a business name, you need to adhere to the name regulations as mentioned in California Code of Regulations, Title 2, Division 7, Chapter 8.5, Section 21000 to 21005.
It is important to ensure that your proposed or chosen name is distinguishable from any other name existing in the records of the California Secretary of State. The name should not mislead the public by creating a false implication of any government affiliation. Once you have chosen a name, ensure it is available by conducting a business name search on the SOS website. You can reserve your business name for a period of 60 days prior to filing the Articles of Incorporation California.
2. Appoint a California registered agent
If you are planning to form a California corporation then one of the mandatory requirements is to maintain a registered agent in the state for service of process pursuant to CA Corp Code Section 202, §1502, §2105, or §2117. The primary responsibility of a California registered agent is to accept legal as well as tax documents from the office of the Secretary of State or other government agencies on behalf of the entity. Hence, such an agent is also known as agents for Service of Process.
A California registered agent needs to have a physical address in the state and it should be operational during regular business hours. IncParadise is one of the most reputable agents for service of process in the state. We can also be your registered agent in California as we are compliant with all requirements of the state. We can also assist you to register a California corporation online as well as help with annual business maintenance as required by the state.
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3. File Article of Incorporation
In order to start a California corporation, you will be required to file the “Articles of Incorporation” with the California Secretary of State pursuant to CA Corp Code § 200.5 (2018). You will have to provide specific information in the articles pertaining to the business including name of the entity, business addresses, California Agent’s name and address, number of shares if it is a stock corporation, and purpose statement. The Articles of Incorporation California has to be submitted along with a “submission cover sheet” and a fee of $100. If you submit in person then there is a counter drop-off fee of $15.
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4. Choose Corporation’s initial directors
The owners or incorporators or initial directors have to be named when filing Articles of Incorporation California. Hence, it is important to choose the directors. Appointing initial directors will help in appointing corporate officers, adopting bylaws, selecting a corporate bank, authorizing issuance of shares of corporate stock, setting of the fiscal year, and adopting an official stock certificate form along with a corporate seal. This process is important and has to be conducted before you register a corporation in California. The initial corporate directors will also serve on the board until the first annual shareholders meeting is held. The California state law advocates that a professional corporation should have a minimum of 3 directors unless the entity has less than 3 shareholders.
5. Prepare bylaws for Corporation
Bylaws is an internal corporate document that provides details of the entire operational structure of the business including the conducting of business and who, when, and how the decisions related to the business entity would be made. The rules and regulations contained in a corporation’s bylaws also known as company bylaws ensures the smooth, efficient, and consistent running of the said corporation.
It is mandatory according to California Corporation Code CA Corp Code § 200 – § 213 (2019) to set bylaws before you start a California corporation although they are not required to be submitted along with articles of incorporation California. You will need to keep a copy of the bylaws at your principal address of the business.
6. Get an EIN
One of the most important requirements to incorporate in California is an Employer Identification Number (EIN). This is a unique nine-digit tax ID number often known as the Federal Employer Identification Number (FEIN). This tax ID number is issued by the Internal Revenue Service (IRS) to specific business entities. If you are planning to register a California corporation online then you will need to apply for and obtain an EIN. We at IncParadise are an experienced and reputable California registered agent and we can help you to obtain an Employer Identification Number (EIN) so that you are able to file your tax return conveniently.
7. Hold an organizational meeting
One of the requirements when you incorporate in California is holding an organizational meeting. This is a type of initial meeting where several tasks related to the business are initiated or completed including the plan to register a California corporation online. Some of the other tasks that are completed in an organizational meeting include election of officers and board of directors, issuance of stock or initial shares, adopting employee benefit plans, and approval of corporate bylaws.
The general agenda for an organizational meeting is normally as follows:
- Signing a “Waiver of Notice” of organization meeting
- Taking note of the people present
- Presenting and accepting the articles of incorporation
- Electing directors
- Election of officers
- Presenting and accepting the corporate seal
- Adopting bylaws
- Presenting and accepting the stock certificates
- Adopting a resolution towards accepting stock offers
- Adopting the banking resolution
- Adopting a resolution for reimbursing expenses
- Adopting any special resolution like IRS Form 2553 for S corporation election
8. Obtain a Business License
In order to form a corporation in California you have to file Articles of Organization in California but to make your business operational, you will need to apply for and obtain business licenses and permits. There are two types of licenses or permits applicable and they are the general business license and the regulated professions and industries licensing.
It is important to note that unlike in most of the other states, business licenses in California are not issued by the Secretary of State or state agencies. Licenses and permits are issued by the cities or counties where the said business is based. You can find detailed information pertaining to licenses and permits using our Business License Research Report service. This service will help you to apply for licenses or permits specific to your business.
9. Open a bank account
Once you register a corporation in California, your business is active but what about transactions? When you start spending (business expenditures) or accepting (revenue) money, it is time to open a business bank account. There are different types of business bank accounts like checking account, merchant services account, and credit card account among others. Some of the benefits of opening a checking account with a bank are:
- Clean and accurate bookkeeping: When you opt for a business bank account, the expenses and revenues are kept separate from your personal account. This separation of personal and business transactions ensure clean and accurate bookkeeping for your accountant.
- Tax: Once you register a California corporation online, you will need to file taxes with the state. If you maintain a business bank account, it will help segregate your business and personal finances thus ensuring you avoid any tax issues.
Some of the other advantages of opening a business bank account are:
- Ability to accept credit card payments
- Getting a line of credit for your company
- Credit card accounts help increase purchasing power
- Business banking offers limited personal liability protection
10. File taxes and reports (Statement of information)
Once you have filed your articles of incorporation in California and obtained the required business license then your company can be termed operational. Once your business is active, there are certain annual requirements that you will need to be compliant with like filing your taxes and statement of information.
- The statement of information has to be filed within 90 days from the date of filing the Articles of Incorporation in California.
- Once you start a California corporation, you will be required to file annual state taxes with the California Franchise Tax Board (FTB). This includes an annual minimum tax of $800, sales tax if required, and an additional tax based on total annual income.