How to Register a Corporation in California?
There are different types of business structures that you can choose from in California but a business corporation is one of the most commonly chosen structures owing to a multitude of reasons. Some of the top businesses in California are actually corporations like Alphabet Inc., Adobe Inc., Apple, Cisco Systems, Cloudera, eBay, Gap Inc., and Intel Corporation among others. If you are planning to start a California corporation then this guide will provide you with an insight into the benefits of incorporating in California and the requirements of operating such a business in the state.
California‘s economy is the largest in the U.S and although 12 percent of Americans reside in California, the state has made a contribution of 14.8 percent to US GDP in 2020. Most of the GDP contribution can be attributed to 99.8% of California small businesses. A large percentage of the small businesses as well as big companies are corporations. You can incorporate in California as there are a multitude of advantages that you will be able to benefit from. You can register a California corporation online or offline in some of the top industries and have access to the state’s transportation gateways, tax credits, business incentives, and human and capital resources.
What is a California Corporation?
A California corporation is a form of legal entity, which is separate as well as distinct from its owners. If you register a corporation in California then it will enjoy the responsibilities and rights that an individual would possess. You can form a domestic or a foreign corporation although the requirements of incorporation will be different for foreign and domestic entities. There are several different types of corporations that can be formed in the US but the key forms include:
- C Corporation
- S Corporation
- Statutory Close Corporation
- Publicly Held Corporation
- Quasi-closed Corporation
- Professional Corporation
- Non-profit Corporation
- Benefit Corporation
In the state of California, you can form social purpose corporations, C and S corporations, non-profit corporations, professional corporations, co-operative corporations, and benefit corporations. When you register a corporation in California there are certain regulations that you will need to be compliant with including maintaining a registered agent.
What are the benefits of incorporating in California?
California, home to some of the most innovative businesses, is one of the fastest economies in the nation. California has the distinction of being the largest manufacturing state in the nation with San Diego, CA being home to 25,000 manufacturers. The San Francisco Bay Area is famous globally as it is home to global technology companies based in the famed Silicon Valley. You can also start a California corporation and become a part of the expanding economy and the innovative business environment. There are also several benefits of incorporating in California like the following:
- Separate Entity: If you form a California Corporation then it will be considered as a separate entity from the owners. Once you have incorporated, the corporation will have its own rights, liabilities, responsibilities, and capabilities. This means that a corporation can also buy or own real estate, lend money, invest in funds, and make guarantees and contracts. One of the salient aspects of a C corporation is that it will continue to exist even when owner’s change and management members are replaced.
- Liability Protection: One of the primary benefits of incorporating in California is the limited liability protection it offers. When you register a corporation in California, it limits the personal liability of shareholders, officers, directors, and employees. Thus, the legal obligations of the corporation will not affect any individual associated with the organization.
- Transferability of shares: One of the top benefits of incorporating in California is that a shareholder of the company can transfer or sell his/her stocks and shares. The buyer of such a share will then automatically become the shareholder of the corporation with all the applicable rights.
- Attracts Investors: One of the reasons why entrepreneurs incorporate in California is because a corporation in this state is attractive to investors as compared to other business structures
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.
Choose IncParadise today as your California Registered Agent!
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.
Incorporate your new business in California Today!
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.
Ready to Start a California Corporation?
There are over 30 million small businesses in the U.S and more than 4 million are based in California. If you want to start a California corporation then there are several industries and business areas to launch your startup in. If you are wondering how to register a California corporation online then we at IncParadise can assist you with the entire incorporation process in the state while ensuring your startup fulfills all California formation requirements.
IncParadise also provides a host of additional services that you can choose from depending on your specific requirement. Some of the top services include foreign qualification, EIN assistance, S Corporation status election, among others.