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).

Author: Brad Nakase, Attorney

Email  |  Call (888) 600-8654

Starting a corporation can help you protect your personal assets while adding legitimacy to your company. To form a corporation in California, Articles of Incorporation must be filed with the California Secretary of State’s office. Incorporating in California will cost a minimum of $100 which is the filing fee with the Secretary of State.

Steps on how to incorporate a small business.

  • Select a Business Name. You need to decide on a small business name for incorporation. Then check business name availability with the California Secretary of State to see if another company does not already take the name.
  • Select a Business Type. Before incorporating a business, an owner should review the advantages of forming a corporation or LLC and fully understand the process. Incorporation leads to a change in finances and administrative structure, so a business owner should be aware of these matters. Whether or not incorporation is the right move depends on the nature and goals of the company. There are different types of business structures, including C corps, S corps, and LLCs. All of these have different advantages for businesses, but much depends on the nature of the company and what its goals are.
  • File Article of Incorporation With the California Secretary of State.The first document to form a small business in California is the Article of Incorporation. File the incorporation form with the California Secretary of State.

  • Obtain IRS EIN number. A EIN is a Employer Identification Number. An Employer Identification Number (EIN) is also known as a Federal Tax Identification Number, and is used to identify a business entity. Appy for an EIN number for free with the IRS.
  • Business Licenses. After you get an EIN and file the Article of Incorporation, ensure you obtain business license and permits in California and the city that your business is operating: Los Angeles, San Diego, Orange County.

Unlike general partnerships and sole proprietorships, incorporating a business in California can provide a business owner significant asset protection. Essentially, a sole proprietor or partner assumes unlimited liability, or responsibility, for his or her business’ obligations and debts. If something goes wrong for the business, such as a judgement being made against it, then the owner’s personal assets (home, car, savings) may be at risk.

Corporations are different in that they allow business owners to keep their personal assets separate from the business, thereby protecting them from potential judgements. An owner of a corporation or LLC does not need to worry about losing his or her car or home because of a legal problem their business is facing.

  • Protection of Personal Assets

Incorporate into a LLC and corporation enable business owners to protect their personal assets by separating them from the business. This means that if a company is correctly managed and structured, a business owner ought to have limited liability for a business’ obligations and debts.

  • Legitimacy

A company that has “LLC” or “Inc.” after its name may benefit from an added sense of authority or credentials. Customers and vendors may have a more positive response to companies seen as legitimate, bearing the mark of incorporation.

  • Availability

Corporations and LLCs are recognized in all fifty states as well as D.C.

  • Protection of a Business’ Name

Depending on the state, one’s business is protected from having its exact name used by another company within the same state.

  • Perpetual Existence

Even if management or ownership changes, corporations and LLCs will continue to exist. Whereas partnerships and sole proprietorships end when an owner leaves the company or passes away, a corporation or LLC lives perpetually. This is because in the United States, a corporation is considered to be similar to a person.

  • Reduced Taxes

After incorporating a business in California, elect Subchapter S tax status, a corporation may skirt double taxation of dividends and corporate profits. Similarly, an LLC can file to be taxed as a corporation.

  • Deductible Expenses

Typical company expenses, like salaries, can be deducted before designating earnings to owners of corporations or LLCs.

Location to Incorporate a Business in California

The location to incorporate a business in California is where they are operating. So, a California company will incorporate in the state of California. This is because:

  • It is less complicated to choose one’s home state
  • Incorporating a company in another state is more expensive
  • One can skirt filing annual reports and paying franchise taxes in multiple states

That said, it is common for corporations to do business all over the United States and across the world. So, a corporation that has offices in many states can incorporate in one state, then register to conduct business in other states. But to conduct business in additional states, one must register, submit annual reports, and handle fees every year.

Corporation and LLC provide protection for the business owner’s personal assets. Corporations are a good choice for a business that plans to seek investors. LLCs are favored by small, owner-managed businesses that want flexibility without a lot of corporate formality. LLCs tend to be popular among small-time entrepreneurs since they have the best of both worlds: the tax advantages of a partnership combined with the simplicity of a corporation. An LLC can be owned by both individuals and businesses.

Corporations offer more flexibility when it comes to their excess profits. Whereas all income in an LLC flows through to the members, an S corporation is allowed to pass income and losses to its shareholders.


Above, we mentioned how corporations receive certain tax advantages. The nature of tax regulations really depends on the specific type of business one creates. Some of these regulations include:

  • C corporations (also known as C corps) file a form 1120 to report the business’ earnings to the IRS. The IRS will tax the business’ profits at corporate tax rates. Meanwhile, dividends granted to shareholders will be taxed at individual rates. A C corp, therefore, is subject to double taxation.

  • A corporation can apply to the IRS to obtain Subchapter S corporation status (S corp). This allows for “pass-through” taxation, which means that owners can report their share of business loss and earnings on individual tax returns. However, an S corp cannot have over 100 shareholders.

  • An LLC has pass-through taxation, similar to a partnership or proprietorship. This way, double taxation is avoided, because the Internal Revenue Service does not assess taxes on the business.

After Incorporating

After incorporating their business, owners may wish to pursue the following steps:

  • Apply for an employer identification number (EIN)
  • Get business licenses and permits
  • Create bylaws

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.
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: What they mean on a tax return

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: Key traits and impacts

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.

Please tell us your story:

0 + 4 = ?