8 Steps on How to Form a Corporation in California

Forming a corporation in California requires you to file an Article of Incorporation with the Secretary of State. However, there are other things you must do to comply with corporate law when forming a corporation in California.

By Brad Nakase, Attorney

Email  |  Call (888) 600-8654

To form a California corporation, you must file a one-page Article of Incorporation with the Secretary of State. You can get the Article of Incorporation forms for free from the Secretary of State and file the Article of Incorporation online. California corporate law requires compliance with when forming a corporation.

In this article, our California corporate attorney discusses how to form a corporation in California in 8 simple steps:

  1. Choosing a Name for a Corporation

The first step in forming a corporation is giving it a name. Think of a unique name so that your corporation stands out. As long as you’re not stealing another corporation’s name or choosing a misleading name, you’re in the clear. You might also choose to include words like ” Incorporated,” ” Limited,” or “Corporation” but you are not required to do so. How will you know what names are already taken? Check to see if your chosen name already exists on the California Secretary of State’s records. You can do this for free in the Secretary of State’s Business Search database or by mailing a Name Availability Inquiry Letter to their Sacramento office. Keep in mind they don’t accept inquiries by email or online, only by postal.

  1. Filing Articles of Incorporation

The second step in forming a business is filing the Article of Incorporation in incorporation. A corporation is officially born when it is incorporated. For a $100 filing fee, you can submit an Articles of Incorporation form (ARTS-GS) to the California Secretary of State, to legally bring your corporation into existence. On your ARTS-GS form make sure to include:

  1. The corporation’s name
  2. The corporation’s street address and their mailing address (if they are different)
  3. The name and street address of the corporation’s agent for service of process (it cannot be a p.o. box address)
  4. The number amount of shares that the corporation has authorization to issue
  5. A purpose statement for the corporation.

Include a Mail Submission Cover Sheet and either file your articles in person or send them in with postal mail.

  1. Appointing an Agent for Service of Process

The third step for forming a corporation is appointing an Agent for Service of Process. California requires every corporation to designate an agent for service of process. This agent must be present in California. God forbid you’re sued; this person or entity would  be the one to accept legal documents on behalf of the corporation. When it comes to choosing an agent, you have two options. You can either choose an individual California resident or an agent for the corporation that has filed with the Secretary of State a Registered Corporate Agent for Service of Process Certificate, which is form 1505. It doesn’t matter which option you choose as long as the agent has a physical address in the state of California. You can’t be your own agent, but oftentimes it is possible to name a director or officer to serve as agent until you can find an alternative. Your choice of agent isn’t set in stone, so you can always designate someone else as an agent in the future. If you are having trouble with this step, be sure to check out California’s Secretary of State’s  private service companies list. These are companies that provide registered agent services.

  1. Preparing the Corporation Bylaws

The fourth step in incorporating a business is drafting the corporate bylaws. You can’t have a corporation without copious amounts of paperwork and documents; the two go hand in hand. Bylaws are the first of many corporate documents to come. Bylaws outline the basic rules for the corporation’s operation. Surprisingly, these are not required by law. However, they are instrumental.

Bylaws lay out your corporation’s regulations and serve as proof of your corporation’s legitimacy. Staying organized is crucial, especially during the first few years in the life of a young corporation. Consider keeping neat and detailed records. You can do this by compiling essential documents, meeting minutes, and other necessary paperwork into a designated binder or folder. Its best to keep this at your corporation’s head office rather than at home where it can get lost or damaged by children and pets.

Warning: Unless you have legal training, do not try to write a corporate bylaws. Hire a corporate attorney to write the corporate bylaws.

  1. Appointing Directors & Holding the First Board Meeting

By signing the articles of incorporation, you have taken on a new title, that of incorporator. As incorporator, it is your responsibility to appoint the initial corporation’s directors. This group of individuals will form your board and will continue to serve until your shareholders meet and vote to elect the next group of directors. After selecting the individuals of your choice, you must fill out and sign the “Incorporator’s Statement”. This document is a compilation of all the initial directors’ names and their addresses. Make sure to keep a copy of this document in your records.

The first board of directors meeting is paramount because it will help lay a sturdy foundation for your corporation. There is a long to-do list for the first meeting. By the end of the initial meeting, you should have:

  1. Appointed corporate officers
  2. Adopted bylaws
  3. Selected the corporation’s bank
  4. Authorized issuance of shares/stock
  5. Set the corporation’s fiscal year
  6. Instituted the corporation’s official stock certificate form and a corporate seal

While all of this is going on, make sure you or a director are taking corporate minutes. There should be an accurate record of the actions taken and the decisions made.

  1. Issuing Stock

Cash flow is the lifeblood of any company and shareholders are the ones who contribute cash and/or property and services to your corporation. In return for these resources, shareholders are issued stock. Under state and federal securities law, stock is considered a security. However, if issuing shares to 35 persons or less, you are covered under a federal exemption and need not concern yourself with federal securities law. However, you will need to claim an exemption under California state law. You can do this by filing with California’s Department of Business Oversight a 25102(f) Notice of Filing, a Limited Offering Exemption Notice, aka LOEN. This should be done online within fifteen days after the issuance of stocks by the corporation. There is a filing fee which ranges from $25 to $300.

  1. Filing a Statement of Information

California requires that every corporation that is registered in the state must have on file a Statement of Information with the Secretary of State, which is form SI-550. This should be done within 90 days after the corporation’s filing of their Articles of Incorporation, and each year after that during the filing period, which is anytime between the month in which the Articles were filed and the five months before that. It costs $25 to file a Statement of Information and you can either file it online or print a hard copy and mail it.

  1. Tax Requirement Compliance

California is known for its back breaking taxes. California corporations in business must pay taxes to the California Franchise Tax Board (FTB). Here is a breakdown of everything you need to know about taxes.

Annual Minimum Tax
Regardless of whether or not your corporation is active, there is a $800 tax that must be paid annually in the first quarter of each accounting period. Newly incorporated companies pay tax on the basis of their first-year income.

If your corporation is generating income that is over a certain amount, you’ll have to pay an additional fee. This fee is calculated using your total income annually.

Procedures for Filing
In terms of filing, your corporation must file a California’s Form 100, which is the Corporation Franchise or Income Tax Return form. It must be paid the 15th day of the third month after the taxable year’s close. For S Corporations being taxed (S corporations pass business income, losses, deductions, and credits to shareholders), they will have to file a different form. They must file California’s form 100S, which is the California S Corporation Franchise or Income Tax Return.

Corporations have to obtain what is called an EIN, a federal employer identification number, which is obtained by filling out a free application, found on the IRS’s website.

California’s Employment Development Department
Payroll taxes are another expense you’ll have to keep in mind. Your corporation will could be ruled by California’s payroll tax if you pay more than $100 in wages during a calendar quarter. The rule can apply even if you don’t have any employees and are only paying yourself as the corporation’s president. The California Employment Development Department provides the employer with account numbers (SEINs). They also administer the state’s payroll taxes, which includes insurance for unemployment and state disability, the employment training tax, and California’s personal income tax withholding.

Have a quick question? We answered nearly 2000 FAQs.

See all blogs: Business | Corporate | Employment Law

Most recent blogs:

What Is a Gap Analysis

What is a Gap analysis?

Gap analysis helps businesses compare current performance with desired goals, identifying inefficiencies. This method aids in developing action plans to bridge performance gaps.
Skills Matrix

Skills Matrix

Utilizing a skills matrix helps identify existing competencies within your team and highlights essential skills for business success. This tool enables strategic talent management and efficient task assignment in organizations.
SWOT Analysis Example

SWOT Analysis Example

Conducting an HR SWOT analysis helps identify strengths, weaknesses, opportunities, and threats within and external to an organization. This process aids in developing strategic HR actions aligned with the company's objectives.

Costco Hot Dog Price Story

The story about Costco $1.50 hot dog price began in 1993 when the Costco merged with Price Club. Costco's $1.50 hot dog price remains unchanged in 2024.

Request for Production of Documents, RPOD, CCP 2031.280

Starting January 1, 2020, California's civil litigants face stricter discovery rules under Cal. Civ. Pro. § 2031.280(a). All produced documents must now be labeled by request number, impacting both new and ongoing cases.
What is a default judgment

What is a default judgment

A default judgment is issued when a defendant fails to respond to a lawsuit, allowing the plaintiff to win by default. Understanding this process is crucial for both parties involved in litigation.
What is a quitclaim deed

What is a quitclaim deed

Quitclaim deeds offer a quick way to transfer property ownership without guarantees, distinct from warranty deeds. Ideal for non-sale property transfers among family or into trusts, they require careful legal consideration.
Sole Proprietorship Business License

Sole Proprietorship Business License

Sole proprietorships offer simplicity and fewer formalities for new business owners, with benefits like no separate taxes. Remember, personal and business assets aren't distinct, impacting liabilities and the need for proper licensing.
What is the most important part of your business plan

What is the most important part of your business plan

The executive summary shines as the pivotal element of a business plan, serving as a decisive factor for readers to delve deeper. A comprehensive guide on crafting an impactful business plan, focusing on unique strategies and essential components.
Easy Businesses To Start

Easy Businesses To Start

Unleash your entrepreneurial spirit with these straightforward home-based business ideas, from e-commerce to creative pursuits. Embrace the flexibility and potential for financial independence with diverse options suited for various interests and investment levels.
What is the standard deduction

What is the standard deduction

Understand the IRS standard deduction, a straightforward option for reducing taxable income without needing detailed documentation. Delve into eligibility, amounts for 2023-2024, and considerations for itemizing versus standard deduction.
How to get a business license

How to get a business license

Grasp the essentials of obtaining a business license in California, focusing on local and state-level requirements. Uncover specifics on when and why different types of business licenses are needed.
Why Do Businesses Fail

Why Do Businesses Fail?

Uncover the key factors contributing to small business challenges, including financial obstacles, inadequate management, and flawed marketing strategies. Understand the role of a comprehensive business plan in ensuring long-term success.
What is a BOC 3

What is a BOC 3

Understand the essentials of a BOC-3 filing for transportation businesses in California, detailing the designation of process agents for FMCSA certification. Learn the requirements, costs, and benefits of choosing the right process agent for your business.
Standard deduction vs itemized deduction

Standard Deduction vs Itemized Deduction

Understand the key differences between standard and itemized deductions to effectively reduce your taxable income and potentially save on taxes. Choose wisely to maximize your tax benefits based on personal financial details.
How to calculate net income

How to calculate net income

Unveil the significance of calculating net income for business profitability, a key indicator for financial health and decision-making. Understand the formula and practical applications for determining net earnings.
Itemized deductions

Itemized Deductions

Optimize your tax return by understanding the differences between itemized and standard deductions, crucial for minimizing tax liability. Learn the benefits and challenges of itemizing to make informed financial decisions.
What are intangible assets

What Are Intangible Assets

Discover the value of intangible assets like patents and trademarks in your business, crucial for strategic and financial planning. Learn how to manage and amortize these non-physical yet essential resources.
What is accounting

What Is Accounting

Understand the importance of accounting in monitoring financial activities and making informed decisions for your business. Gain insight into accounting fundamentals and its role in legal and tax matters.
Dysfunctional family

Dysfunctional Family

Explore the impact of growing up in a dysfunctional family, where constant conflict, neglect, and various addictions shape childhood experiences. Understand common traits, the consequences on children, and the cycle of unhealthy parenting behaviors.
When Was the Great Recession

When Was the Great Recession?

Delve into the Great Recession's timeline, an era of financial distress from December 2007 to June 2009. Understand the causes, including the 2007 housing bubble crash, and worldwide effects.
When Was the Last Recession in the US

When Was the Last Recession in the US?

Review discussions on America's most recent downturn, comparing the impacts and definitions of Covid-19 and the Great Recession. Analyze the significant effects of past economic crises on US policy and business approaches.
What to Invest in During a Recession- 4 Ideas

What to Invest in During a Recession: 4 Ideas

Uncover effective strategies for investing during a recession, assessing personal goals and current market situations. Examine four robust investment approaches to manage through economic declines effectively.
Will the US Get Hit with a Recession in 2024

Will the US Get Hit with a Recession in 2024?

Experts debate the likelihood of a 2024 US recession, analyzing factors like the yield curve and consumer confidence. Predictions vary, with a focus on interest rates and tech layoffs impacting the economy's future.
How Long Do Recessions Last

How Long Do Recessions Last?

Learn about typical US recession lengths and influencing factors, noting recent trends with shorter durations averaging 10 months. Investigate how external factors and government decisions affect recession timelines, comparing historical data.
When Will the Recession End

When Will the Recession End?

Economists predict a mild US recession with limited impact on employment and spending. The duration and impact of the recession depend on Federal Reserve policies and business cycle patterns.

Contact our attorney.

Please tell us your story:

4 + 1 = ?