Incorporate a Business in California

Yes! Most people think of the C Corporation when talking about Corporations, but there are other types, too, such as Professional Corporations, Nonprofit Corporations, Close Corporations, Benefit Corporations, and S Corporations. Not all states recognize all of these types, and some states might offer other variations. When choosing which type of Corporation to form, business owners must consider the business activities they will conduct, their goals and objectives, where they intend to operate, potential tax outcomes, and other factors.

The most significant advantages of incorporation include liability protection for shareholders and directors; transferability of ownership through the sale or redistribution of shares; more tax-planning opportunities (depending on the jurisdiction and circumstances); and increased credibility with customers, vendors, investors, and lenders.

Like any other business structure, forming a Corporation may or may not be the best choice for a company and its owners. Corporations have more initial formation requirements and ongoing compliance obligations (and associated costs) than other types of business entities. Also, some profits are subject to “double taxation”: profits distributed as dividends to shareholders are taxed at the corporate level when earned and at the individual level when paid to shareholders. Business owners should weigh these considerations against the upsides of incorporating to ensure they make an informed decision.

It must meet the IRS criteria. To qualify, it must be a domestic Corporation; have no more than 100 shareholders; have only one class of stock; have shareholders who are exclusively individuals (U.S. citizens/residents), certain trusts, or estates; not be an ineligible Corporation, e.g., certain financial institutions or insurance companies. To request the S Corporation election, the business must file IRS Form 2553.

Several recurring responsibilities include holding board of directors and shareholder meetings, recording minutes of those meetings, filing annual reports (if required by the state), renewing required licenses and permits, and maintaining a registered agent.

While it’s wise to consult an attorney about legal matters when forming your business, enlisting a lawyer to prepare and submit your incorporation documents is not required. In fact, you can potentially reduce your legal fees significantly by using a trusted online business filing service, like CorpNet, to complete your paperwork and handle the filings.

California allows the following types of Corporations:

• Domestic Stock Corporation
• Foreign Stock Corporation
• Domestic Close Corporation
• Domestic Professional Corporation
• Foreign Professional Corporation
• Domestic Common Interest Development Corporation
• Domestic Nonprofit Mutual Benefit Corporation
• Domestic Nonprofit Public Benefit Corporation
• Foreign Nonprofit Corporation
• Domestic Nonprofit Religious Corporation
• Foreign Insurer Corporation

A Foreign Corporation is a Corporation that conducts business in California but that was formed in another state. Foreign Corporations are required to register in California and obtain a Certificate of Authority to Transact Business in California.

Domestic Corporations are those formed in California. While there is no residency requirement for directors or officers of California Corporations, a registered agent (who may also be a corporate officer) must have a physical address in California along with regular business hours. They have to be available to take phone calls and respond to legal matters. Hiring a registered agent will protect your privacy and meet the requirements of incorporation in California.

CorpNet lets you select the processing speed you want. With Standard Processing, we prepare and submit your state forms in 3 to 4 business days. You receive your official documents once the state completes processing and returns them to us.

If you want your documents sooner, our Express Processing ensures we prepare and submit your forms within 1 to 2 business days, and you’ll receive your official documents once the state completes processing and returns them to us.

For an even faster turnaround, we suggest our 24-Hour Rush Processing option. In as few as 2 hours after you place your order (and no longer than 1 business day), we prepare and submit it to the state. You’ll receive your official documents as soon as the state completes its expedited processing and returns them to us.

When registering a Corporation, its name must be distinguishable from other existing Corporations in the Secretary of State’s records and must not be misleading to the public. A Corporation’s name must have an appropriate identifier to indicate its business structure. Possible examples include Company, Incorporated, Incorporation, Limited, Corp, Co, Inc, Ltd, PC, and Professional Corporation.

Corporations must file an annual report (Statement of Information) by the last day of the entity’s anniversary month. California also requires Corporations to file an annual franchise tax report with the California Franchise Tax Board. A C Corporation must file Form 100 by the 15th day of the 4th month after the close of its business’s tax year). An S Corporation must file Form 100S by the 15^th day of the 3^rd month after the close of its tax year. The minimum franchise tax due is $800.

If entrepreneurs wish to reserve a corporate name before filing their entity formation document, they may file a Name Reservation form to verify and hold a name for up to 60 days. All Corporations must file Articles of Incorporation to establish their legal entity; there are seven variations tailored to the specific type of Corporation. Another mandatory document is the Certificate Pursuant to Corporations Code Section 1505, which designates a registered agent (agent for service of process).

In addition, California requires an initial report, called a Statement of Information (Form SI-550), within 90 days of filing the Articles of Incorporation to provide the state with information about its corporate officers and structure (some of the information required on the Nonprofit Corporation version of this form differs from the for-profit Corporation form).

All publicly traded stock-issuing Corporations must file an annual Corporate Disclosure Statement.

A Corporation must maintain all of its formation documents, amendments, meeting minutes, annual reports, and other records at the principal place of business.

Corporations in California must have a board of directors composed of individuals who are at least 19 years old. The directors’ names and addresses must appear in the articles of incorporation.

Corporate officers need not appear in filings, but information about officers and stockholders must be maintained at the corporate office.

Generally, California requires a Corporation to have at least three individuals on its board of directors. However, if the company has only one or two shareholders of record, there may be fewer than three directors, but not fewer than the number of shareholders. The officer positions required on a board include president (or chair), treasurer, and secretary. The same individual may serve in all three capacities.

In their bylaws, Corporations may specify a specific number of directors or a minimum/maximum range. If a range, the minimum may not be less than three, and the maximum may not be more than two times the minimum minus one. For example, if the bylaws state a minimum of 5 directors, the maximum number of directors may not exceed 9.