Information about California franchise tax or income tax

Any corporation ‘doing business’ in California is subject to the minimum franchise tax even if it is not qualified with the California Secretary of State. ‘Doing Business’ means actively engaging in any transaction for the purpose of financial gain.

If you qualified with the Secretary of State, your corporation is subject to the franchise tax until you dissolve your corporation.

• What is the minimum California franchise tax? Minimum tax is the amount you must pay the first quarter of each accounting period whether the corporation is active, operates at a loss or does not do business. The current minimum tax is $800. For new corporations that qualify or incorporate with the Secretary of State after January 1, 2000, the tax is measured based on their income for the year and subject to estimate requirements. For subsequent years, the minimum tax $800.
• More information about California Franchise Tax.

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The economy in California is one of the strongest in the country with health, education, and business services sectors being the most enterprising in recent times. New business incorporation in California has been taking place quite rapidly with Los Angeles County being quite the favorite for small and medium enterprises (SMEs).

Whether it is favorable business climate or privacy that you seek, the state of California offers lucrative business opportunities. This is probably the reason why the state is considered as one of the fastest for spawning new businesses. According to the U.S. Census Bureau, Beacon, business creation rate in California is a good 11.4% as compared to the rest of the U.S, which is at 10.1%.

Why Choose California for Incorporation?

There are several reasons why there has been a rise in company incorporation in California and one of these reasons is the advantages that businesses enjoy. Some of the advantages include:

Asset Protection

Incorporation in California will provide protection to Directors and officers of an organization from personal liability against any business debts or even lawsuits that may arise during the operational phase of their corporation. Such a situation could also arise from the actions committed on behalf of your corporation.

Note: The extent of personal liability exposure will be limited to the amount of initial capital investment.

Flexibility in Management

When you set up a company in California, your corporation will require only three positions to start with and they are: president, secretary, and chief financial officer (CFO). The above mentioned positions can be filled by a single individual. If your California Corporation consists of 2 shareholders then there has to be a minimum of 2 board members.

Tax in California

Corporations in California are taxed at only 9% and other tax benefits are available depending on specific types of corporation being formed.

Flexibility in Stock

One of the remarkable advantages of company incorporation in California is that corporations can sell, gift, transfer, or even purchase shares of their own corporate stock. A California Corporation can also issue stock for property, cash, and other services. Directors have the flexibility of determining the value or net worth of stock, and this stock can exist in a quantifiable form like capital value, property, and liquid funds among others.

Credibility

Company incorporation in California will help in increasing the overall “credibility” of your business, which will further develop investor interest in your organization.

How do you incorporate in California?

If you are planning to set up a company in California then you will be required to follow certain procedures that will aid in the formation of your Corporation or LLC. We at incparadise.net have specialists on our team who can guide you towards setting up or forming LLC, California C Corporation, and California S Corporation in the shortest possible period.

Here is a step by step procedure towards incorporation in California:

Type of Business

You need to identify the type of business you want to start with. You can choose from a general stock corporation, a non-profit mutual benefit corporation, close corporation, LLC, Limited Partnership (LP), General Partnership (GP), or Limited Liability Partnerships (LLP).

Business Name

The second step is to identify a name for your business along with the required suffix, which will indicate the type of business entity you have formed. If you opt for company incorporation in California then it is essential to check up a corporate name and reserve it with the Secretary of State prior to filing your Articles of Incorporation. You can find detailed information on checking names here.

Note: It is important to check because if the chosen name is not available after the submission of the Articles of Incorporation then your incorporation documents will be rejected.

Registered Agent

You will need to name a registered agent who will be responsible for initiating the processing of your Articles of Incorporation. As a California registered agent like incparadise.net, we can receive any and all legal and business related paperwork on your behalf.

Articles of incorporation

You will need to file articles of incorporation, which we can always file on your behalf through the standard process or online or through expedited process.

Date Stamped Copies

As a part of the process of company incorporation in California, we will ensure, you receive date-stamped and filed copies that verify that the state has filed as well as formed your corporation.

Costs and Fees associated with California Incorporation

What would it cost to set up a company in California? Is it expensive? Is it time consuming and exhaustive? All we can say is that “You are in good hands!”

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The Gross State Product of California is $2,459 billion and its $2.46 trillion economy is the 6th biggest in the world today. It offers just the kind of profitable business environment that you have been searching for. You can harness the existing infrastructure and benefits of forming an LLC or corporation and experience tremendous growth from a long-term perspective. Are you ready to form a business in California?

If you have decided on company formation in California then it is probably one of the best business decisions you can ever make. The decision is the easy part but the registration and formation can be time consuming. Whether you are thinking of forming an LLC or incorporating in California, here’s some information that will definitely guide through the process.

Where do you begin? The process for California LLC and Corporation registration and formation may seem like an exhausting one but once you have hired a California registered agent like us, we will ensure, the entire process is simple and quick.

Let’s take a look at how to form a California business corporation or LLC.

California LLC Registration and Formation

If you are planning to form an LLC in the state of California then it comes with limited liability and several other benefits. The procedure for registration and formation of LLC is as follows:

Step 1 – Hire a registered agent

According to California law, every business is required to maintain a Registered Agent. The agent should have the authorization to work as a registered agent in the State of California. We would use this opportunity to share with you the fact that we are one of the top registered agents in the state of California and have been responsible for over 11,494 companies formed in California.

We are in compliance with all regulations in the State of California.

Step 2 – Choose a Name

LLC name requirements in California are quite stringent and your LLC name should be distinguishable from any other LLCs that exist in the state. You will need to fill the “Name Reservation Request Form” available here and request reservation of limited liability company name. You can mail it to the Secretary of State or drop off in person at the Secretary of State’s office in Sacramento.

Step 3 – Articles of Organization

If you are planning to form a California business LLC then the most important step is to prepare and file the Articles of Organization. The Articles of Organization (Form LLC-1) has to be filed with the California Secretary of State along with the filing fee. We can file the form on your behalf as your registered agent in the state and provide you with certified copies of this filed Articles of Organization.

Should, you have any questions, feel free to call us at 702-871-8678.
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California Corporation Registration and Formation

If you are planning to form a Corporation in California then the procedure for registration and formation is as follows:

Step 1 – Hire a registered agent

According to California law, every business is required to maintain a Registered Agent. The agent should have the authorization to work as a registered agent in the State of California. We would use this opportunity to share with you the fact that we are one of the top registered agents in the state and have been responsible for over 11,494 companies formed in California.

We are in compliance with all regulations in the State of California.

Step 2 – Choose a Name

If you are planning to form a Corporation in California, you will need to identify and check name availability of your business. You can reserve your business name for a period of 60 days by filling and submitting the “Name Reservation Request Form”. You can download the form from here and submit to the Secretary of State along with the filing fee. It can be submitted by mail or in person at the Secretary of State’s office in Sacramento. The request for reserving a corporation name can also be submitted in person at the Los Angeles regional office.

Step 3 – Certificate of Formation

Successful company formation in California is possible only after your Articles of Incorporation has been submitted with the Secretary of State along with the necessary filing fee. The Articles of Incorporation (Form ARTS–GS, ARTS–CL or ARTS–PC) will be different for different types of corporations just like the form for general stock corporations is different from professional corporations. Once you make a decision regarding the type of corporation, we as your registered agent will file the applicable forms.

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If you have any questions regarding California incorporation or LLC formation, you can simply visit the California Business formation page.

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.

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Now that you have formed a corporation or LLC in the state of California, it’s important to know that you will require a business license to make your business operational. It’s often referred to as a general business license and you will be unable to conduct business in the state without an appropriate business license for the city or county you are planning to operate from.

The requirements for a general business license in California are governed by the business regulations for each city or county. They have different names as well; for instance, it’s known as California business tax certificate in some cities. Let’s take a look at an example to understand this better.

If you have started a restaurant in Santa Ana, Orange County then you will require a general business license. However, if you start another restaurant in Chula Vista, San Diego County then you will require a business tax certificate. Essentially, they are both the same.

How to Obtain California State Business License

How and where can you get your California company license from? You can obtain your California state business license by completing an online registration here. This is a service that will not only allow you to apply for a license but also renew it.

It’s the department of consumer affairs that is responsible for issuing a California company license. The California Department of Consumer Affairs (DCA) offers the “BreEZe” online services, which is a fairly new licensing system. You can submit applications for a new business license, for the renewal of an existing license, request for a duplicate license and apply for other services including change of address. You will need to register here in order to download license form and submit.

The time taken and the fee to process business license in California varies from one county to the other as the forms and methods of submission are different.

Types of Business License in California

There are different requirements for business license in California and it varies according to the type of business and business activity being conducted by you. The licenses are broadly categorized under two headings, which are:

General business licenses

This is the basic form of business license and is often referred to as a business tax certificate in different counties. Depending on the county, you are going to operate from; you can submit your license application online or through the post office or even in person. The fees for the license vary according to the county; for example the fee for general business license in Sacramento County is $146 and it’s valid for 3 years. Normally, a flat fee rate is charged or a gross sales percentage is taken into account. In some counties a combination of flat fee and gross sales percentage is mandatory.

The general business license in California form is different for different counties. You will be required to provide your business name, name of owner, address and other contact as well as business information, predicted yearly sales information, and Federal tax ID number.

License for regulated profession and industries

This is a type of California company license that is in addition to the general business license. it’s mostly required for fulfilling compliance with other regulatory, environmental, licensing, and administrative laws. You can search for a database pertaining to regulated professions and industries at CalGOLD. If you are planning to lease or sell merchandise then you will require a seller’s permit as well.

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Note: The review and processing of the license application form varies from one county to another but as a norm it can take anywhere from 2-3 weeks for general business license. The maximum processing time though is 45 days.

Are you thinking to become one of the top business entity at California? Then, decide on the business structure which is very few in numbers in California. Hence, starting up the business in California requires a lot of research.

California Business Facts

The Orange County, California, has come up as one of the great leaders in the companies with the advanced technologies. It is the most affluent state in the United States due to its incredible business structures, although which are decidedly less in numbers.

Choice of an individual’s business structure depends merely upon the type of industry, business plans including the size and strength of the business and growth goals. Primary industry type includes agriculture, entertainment, technology as well as millions of tiny business entities.

Major Companies

If you dream of starting a business in California, you have chosen one of the top-ranked states of the nation concerning global competitiveness. Tons of successful companies belongs to California like Apple, Mckesson, Intel, Disney, Hewlett Packard Enterprise, Facebook, Oracle, Cisco Systems, Paypal Holdings and lot more which can be easily recognized by all.

Startup Environment

It is the best option for starting a business in California because it supports the growth of the new start up’s. Though, it is also considered to be the most difficult one to operate in this state is the more preferred one as it promotes innovations. The reason for being it this way is that it is comparatively the impositions of the tax rate is higher in California.

Here are the steps for starting your business in California:

Step 1: Plan Your Business

The very first step for starting a business in California is the planning process. Converting the business idea into a successful business venture requires a blueprint of your business plan.

For starting a business in California, get prepared with every internal and external element your business set up requires on a paper. The business planning requires idea generation, environmental planning, feasibility analysis, project report preparation, evaluation, and review.

If preparing a business plan for starting a business in California, know your sources of idea generation. Keep a track on existing companies/business, customer requirements, employees, research and development process and dealers/ marketers.

While planning a business, scanning of the environment is also necessary for starting a business in California.

The business idea may get affected by some external environmental factors like–

• The acceptance of the product by the people with socio-cultural beliefs.
• Technological updations which hassle the conversion of an idea into a product.
• Consumption pattern including – per capita income, economic development, national income and everything else which is related to the status of the society.
• Population patterns like age, gender and their distribution in the geographical area can also affect your business idea. So, starting a business in California requires a detailed study of the geographic pattern based on your product or business idea.
• For starting a business in California prepare a business plan including the government appraisals. The more rules and regulations, government policies you know the more successful business plan you will make.

The business idea for starting a business in California may also get affected by some internal environmental factors like –

• Availability of the raw material as per your product, types of equipment and required techniques.
• Staring up a business in California also requires finance which falls under the internal environmental factors. Fixed and running expenses sources may affect your business plan.
• Estimation of demands and supply in the business plan is also an essential parameter of planning/starting a business in California.

Plan a business to meet the long-term goal

For starting a business in California, a long-term goal requires a market plan. A perfect market plan decides the optimum use of the resources(financial or human).

If preparing the market plan, consider the following points:

• Before starting a business in California, it is vital to know the customer requirement and responses for your product.
• Try to target a market where you analyze more demand for your product. Based on the target market customer segmentation can be done.
• Decide the fair market value of your product, do the business valuation followed by the distribution and promotion of your product.

Step 2: Choose an apt Business Structure

To become a successful and large business entity and especially starting a business in California requires choosing a perfect business structure. Once you select your business structure, you may get prepared with a more detailed stepwise study of your business idea.

The different business structures include partnerships, corporations, limited liability companies (LLC) and sole proprietorships.

Starting a business in California requires to have more in-depth knowledge of business structures as it affects the liabilities of your company.

Types of Business Structures

1. Sole Proprietorship: When the owner of the business entity or the new venture is legally accountable for all financial decisions, the business structure is said to be as the Sole proprietorship. The owner or sole trader is responsible for debts, profits, losses, and even loans.
   A sole trader or the sole proprietorship business structure can only use their business name regardless of the legal name. The Sole Proprietorship structure is also known as DBA structure (“Doing Business as “). It is a least formal business structure which one can opt for starting a business in California.This structure does not have the liability protection.
2. LLC: Limited liability company is the most used and reliable business structure business entities opt for starting a business in California. These structures do provide the liability protection without requiring the extra paperwork.
   The most critical factor for choosing this type of business structure is that the California only allows this for a single member of the company, sometimes called as SM-LLC’s.
3. C Corp: If you are Starting a business in California as the large business entities as they intend to attract shareholders and investors with broader ownership in a corporation. The corporation is responsible for paying taxes of its own.
   If you are about to become a business entity using the public trade shares and the protection from liabilities this the best business structure one can opt.
4. S Corp: This type of business structure involves the external team of shareholders (up to 100), the board of directors and some corporate officers.
   Claim the profits on the basis for the personal taxes paid by the shareholders.

Step 3: Tackle License & Tax Obligations

For starting a business in California, it is essential to have a business tax certificate or the license. The business permit depends upon the type of business entity you own. In California, a business entity has to pay the penalty according to the IRS and government guidelines, without having the business permit.

The only bad news for the small business entities is that comparatively, California has the higher tax rates. California is the only state where the small business entities have to pay double the taxes (personal as well as the business). As an example, Limited liability and the S corporations have to pay double taxes.

• Local: California issues general city level business permits. We suggest, to see the Chamber of Commerce for local business permits requirements like the filling of the application forms. As, based on the local business license requirements, there may be specific regulations related to the type of your industry.
• State: For starting a business in California, CalGold is a precise Permit Assistance tool to figure out the apt taxes and permits which applies to your business entity as per the updated government guidelines.
  Also, the California Department of Tax and Fee Administration website contains the necessary information which aid to know more about the state business permits.
• Federal: To know about the federal permits the most advisable website is IRS. The site updates give you every detail of the license as per the IRS and government guidelines.To find out an article on it, you can visit the Small Business Association’s website. The website has covered the federal government specific requirements for the permits. They have also shared some faithful agencies information.

We suggest hiring a business license service for starting a business in California so that they can give proper assistance to you and based on your business type the figure out and guide that how you should go about it. You will prevent yourself from the penalties in this way.

Step 4: Create A Financial Foundation

Another important step you have to keep in mind while starting a business in California is Financial management. The power of this concept can decide how successful your business entity could be.

Managing the business bank accounts is more than an art. If you intermingle your professional and personal system of finances, you are going to put yourself in a huge mess. And for that obtain an Employer Identification Number. EIN keeps your account separate from the one related to your personal finances as it does not require your security number.

After getting your EIN, figure out the best – suited banks in your area. All it takes to know about the statistics of bank’s fee structures, the feasibility of mobile banking features, how they provide customer service and accessibility of National ATM. Everyone’s business entity has different requirements and priorities. So, investigate by the type of your business plan and strategy.

Do not hesitate to inquire more and more about the bank you choose as it is the necessary step of the financial management. The synchronization of your business bank account with accounting software is also a smart move. Entrepreneurs recommend the national banks and Banc of California for starting a business in California as a small business entity.

Step 5) Finance Your New Business

It is a very challenging step of all when it comes to starting a business in California. As a start-up business entity there are several funding options in California all you need is to approach the correct one.

If you are looking for a perfect start-up funding options, do your homework first. Understand your business structure requirements, type of product, the personal credit and future value of your sales. There is also a secondary option to sell off some of the company’s asset in return for the funds. Having an investment from the third parties may cost you the partial right over your business entity.

You can refer to the California Small Business Development Center to find out the best funding agencies and approaches depending upon the locations of your business entity across the state.

Step 6: Build A Brand

Starting a business in California requires the branding of your business entity to differentiate it from other competitors. Are you planning to have a brand image for your business entity? Then, bring your focus to the business website and the design of its logo. Creating a logo is like forming a lifetime symbol for recognizing your business success.

The choice of colors is one of the ways to attract your target customer. Regardless of this create a legit logo which should be as unique as possible. A professional logo seems more eye-catching to the target customers as well as to the competitors. It is good to invest some fine amount on professionals in the website’s logo creation. If you are starting a business in California, then the competition is going to be more stringent than you might think.

If you create a professional looking and a legit website and yet want to keep it into the budget, you can work on the readily available platform like Wix or StudioPress. Several websites builder are also available, but we instead suggest to hire a professional for the logo design for your website. After all, it is going to represent your business idea.

Step 7: Market Your Business

While starting a business in California, you must be pretty well aware of the competition between the several small business entities of the similar kind. What makes you different from one another is your effective business plan and strategy. But, your the success of your business entity entirely depends upon the sale of the business. Thus, your marketing strategy should be efficient enough to grab the target customer in just a one go.

The foremost thing of creating the marketing strategy is knowing your target market and its demand. One can choose to advertise the business product by this. The most efficient way to advertise is the digital marketing. It includes the search engine optimization, Social media marketing, email marketing, pay per click and so on.

We suggest you hire a professional for all, but before that, it is essential to know your customer demands and then to design your product accordingly. After understanding every requirement try to choose that form of digital marketing which best suits your target market. Keep testing the results and then stick to the one which generated the maximum leads for your business.

With the growing technology, more and more marketing tools and software have emerged. It is the prime duty of a business entity to be up to date so that there could always be a win-win situation for the business.

How can IncParadise help you?

Now that you know how to start a business in California, and you have the business idea and plan ready with you, the next step is to incorporate the business. Inc Paradise can assist you in registering and incorporating your business in California.

In case you want any other services like mail-forwarding or so, you can check out the details on the website and choose the package that is best suitable for you. You can also customize the package depending on your requirements and needs. Head over now to open your dream business today and have it registered with the government!

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