Learn how to Form a Corporation in California.

To form a corporation in California follow these steps: 1) Write a one page Article of Incorporation, 2) File the Article of Incorporation with the California Secretary of State, 3) Elect corporate board of directors, 4) File Statement of Information with Secretary of State.

Author: Brad Nakase, Attorney

Email  |  Call (888) 600-8654

Forming a corporation is a daunting endeavor for many entrepreneurs, full of uncertainty and hesitation. This is especially true in California, where complex corporate law forms a corporation. This article highlights the steps on how a corporate attorney lawyer forms a corporation.

  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:

  • The corporation’s name
  • The corporation’s street address and their mailing address (if they are different)
  • The name and street address of the corporation’s agent for service of process (it cannot be a p.o. box address)
  • The number amount of shares that the corporation has authorization to issue
  • 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:

  • Appointed corporate officers
  • Adopted bylaws
  • Selected the corporation’s bank
  • Authorized issuance of shares/stock
  • Set the corporation’s fiscal year
  • 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:

Characteristics of an Entrepreneur Mindset

An entrepreneurial mindset is determined, creative, resourceful, and resilient in the most adverse circumstances. An entrepreneur mindset is often positive thinking and comfortable with discomfort.

How To Start Drive Through Coffee Kiosk

Learn steps to start a drive-thru coffee stand begins with a concept or theme on what the coffee kiosk will look like to the public. Then, you must draft a business plan on how the drive through coffee stand will succeed.

What are the components of a marketing plan?

A marketing plan is a strategic outline businesses use to organize, execute, outreach to specific customers, and track their advertising strategy based on a schedule that includes weekly, monthly and yearly activities.

How to transfer LLC ownership?

Two common ways to transfer LLC ownership are to conduct a partial sale to a third party or sell your entire LLC to a third party.

Why Do Companies Incorporate in Delaware?

The State of Delaware offers companies lenient tax benefits and liability protection. Also, companies that incorporate in Delaware do not have to do business in the state.

What Is Business Communication?

Business communication is exchanging information between employees within the workplace and people outside a company.

What Does a Business Lawyer Do?

A business lawyer provides legal services and educates companies on legal matters, including litigation, best practices, applicable laws, creating legal documents, business formation, conflict resolution, business dealings, business transactions, and best business practices.

Inc vs. LLC

Incs. is short for incorporated, and LLC is short for Limited Liability Company. For Inc., where the owner elected to be an S corporation, the profit and loss are passed to its shareholders, whereas income and loss in an LLC flow through to the members.

Compare LLC and Inc.

An Inc. is short for incorporated and an LLC stands for a limited liability company. Both protect company owners from personal liability for business obligations.

How to Start an LLC in California

To start an LLC in California, you may hire a lawyer or do it yourself by going to the Secretary of State's website and registering your business as an LLC by filing the Article of Organization and following the instructions.

Can Two Businesses Have the Same Name?

It depends. If the business name is a registered service mark or trademark, another business cannot have the same name because it violates trademark law. You must perform a three-part test if the business name is not a registered service mark or trademark.

Material Breach of Contract

A material breach of contract occurs when a party fail to perform a contract's terms making the primary purpose of the contract not met, the breach is considered material.

What Type of Business Is a Partnership?

A partnership is the simplest business structure where two or more people are owners of a business. The types of business partnerships include general partnership, limited partnership, and limited liability partnership.

What Is Company Culture?

A company culture is how things get done in the workplace. Company culture can more be described as core values or operating principles used to set the tone for the company's overall operations and success.

What is a sole proprietorship?

A sole proprietor is someone who owns an unincorporated business by himself or herself. A sole proprietorship is a business that can be owned and controlled by an individual.

Sole Proprietorship vs. LLC

Sole proprietorships are popular for self-employed professionals, freelancers, and contract workers, while LLC offers personal liability protection than sole proprietorship.

Is it legal to sell homemade food in California?

Yes, you can sell food from home so long as you have California-required health and food handling permits and business licenses. You must get a permit to sell food from home from the county health department in California. 

How to Incorporate a Small Business in California?

To incorporate a small business in California, file an Articles of Incorporation with the California Secretary of State's office. After you file the Article of Incorporation, create corporate bylaws, and elect your initial director(s).

6 Steps for Planning a Business Grand Opening

1. Create Goals for the Event, 2. Begin Planning Early, 3. Stick to the Budget, 4. Have the Right Insurance, 5. Advertise Before the Event, 6. Offer Food and Entertainment

10 Facts About Business Before Starting A Business

1) More than 50% of new businesses survive their first year in business. 2) Less than 50% of family-owned businesses are passed to their children. 3) 40% of business experience challenges in the supply chain…

S Corp vs C Corp – Differences and Benefits

The main difference between an S Corp and a C Corp is that for a C Corp, the corporate profit is taxed to the company, and the dividends to the shareholders are also taxed. In contrast, for an S Corp, the profit is taxed to the shareholder but not to the corporation. Generally, small businesses are S Corps, and major companies are C Corps, e.g., Apple, Microsoft, Caterpillar, John Deer, etc.

How to Form a Corporation in California?

To form a corporation in California follow these steps: 1) Write a one page Article of Incorporation, 2) File the Article of Incorporation with the California Secretary of State, 3) Elect corporate board of directors, 4) File Statement of Information with Secretary of State.

What are the benefits of a corporate lawyer?

The are many benefits of hiring a corporate lawyer for your business which includes: avoiding litigation, enforceable contracts, develop employee policies, proper licensing, etc.

What is Commercial Litigation?

Commercial litigation refers to litigation (lawsuit) that involves commercial or business disputes in court between two or more parties.

How to Get Rid of a 50 50 Business Partner.

How to Get Rid of a 50/50 Business Partner. One method to get rid of a 50/50 partner is to file a business partnership dissolution in the state your company was formed to end the partnership.

Personal Assistant Scam

A personal assistant scam typically involves a perpetrator putting out an ad to hire a personal assistant. Then, when the perpetrator purportedly hires the personal assistant, the assistant is asked to buy something with their own money with the promise to be repaid. The perpetuator then disappears after receiving the goods.

Fiduciary Responsibility Definition

A fiduciary responsibility refers to an organization that must put another person’s best interest first. A fiduciary duty is the highest standard of care in law. For example, a lawyer owes a fiduciary responsibility to the clients, a doctor owes a fiduciary duty to a patient, and a trustee owes a fiduciary duty to a beneficiary.

Contact our attorney.

Please tell us your story:

1 + 0 = ?

© Copyright | Nakase Law Firm (2019)