Starting a business is exciting! Ready to start your corporation in California? We’ve got you covered in nine easy steps.
You must take numerous steps to get your California corporation started on the right foot. However, what can often seem like a complicated process is pretty simple if you have the correct information.
Did you know that many people who formed or maintained their corporation did not do it properly and were not protected from personal liability? If you need assistance incorporating your business, please contact us for a free consultation. Our fee is competitive. For example, many law firms charge $500 per year to act as a corporate agent for the service of process. At Nakase Wade law firm, we will act as your agent for service of process for FREE.
We invite your attention to our disclaimer.
Brad Nakase, Attorney
Step 1: Corporation’s Name
Now for the exciting part: what would you like to name your business? What is a title or label that will interest customers and consumers, encourage web clicks, and most importantly, make you excited to come to work each day?
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Make the Name Unique
Every successful company has a unique name. The name of the specific corporation you are forming in California might develop from your own family, a personal goal or passion of yours, or a combination of different concepts and ideas that are important to you and your team. While you’re thinking of the perfect name, let’s look at the fine print.
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Name Requirements
Your new name cannot be:
- Too similar to an existing name in the state’s records
- Misleading in terms of connotation or subject: you do not want to mislead the public, which is made up of your possible customers!
- You also do not want to make it too confusing or abstract to take seriously. You need a balance here.
Your new name can:
- Include the words’ corporation’ or ‘limited’ or ‘incorporated’ or separate abbreviations of said terms
- Be eye-catching, attention-grabbing, fresh, and distinct
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Run Name Searches
Make sure that the name that you choose is not already taken, too. There are a few ways to check on this. One, you can use the business search database, which is easily found online. Two, you can contact the Sacramento office by sending a Name Availability Inquiry Letter over there. Unfortunately, they do not allow you to check on this via email or the web.
When you find and agree on your new name, it can be reserved for 60 days, and you can do this through the office in Sacramento, as well, via snail-mail or in-person.
Step 2: Designate an Agent for Service of Process
This may be California, but we’re not talking about Hollywood here. Instead, you’ll need to get familiar with the concept of Agents used for Service of Process. What type of agent is this?
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Agents for Services
This is simply a corporation or individual who acquiesces to accept legal documents on behalf of the corporation in the case that the company issued. Of course, we hope that your valuable and important business is not sued, but it is important to be prepared.
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Agent Requirements
For service of process, a corporation is not able to act as an agent of itself. Your chosen agent must, on behalf of your business, accept the service of process before being designated ‘agent for service of process’ or ASP.
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Finding an Agent
How do you find this agent? The agent needs to be: An individual residing in California or a corporate agent who has filed Form 1505. They also must be a person with an address in the state of California, as opposed to a PO box.
Many small corporations simply choose an officer or a director, at least to begin. Important
Fact: you have the ability to change this agent later on in the process.
Did you know that the state of California keeps a record of private businesses that can become agents for your usage? Feel free to contact them to use this fantastic resource, and as always, if you have any questions, please get in touch with our corporate business attorneys.
Unlike other law firms that charge up to $500 per year – Nakase Wade law firm may act as your corporate agent for service of process for FREE. Please contact us to inquire.
Step 4: Corporation’s Article of Incorporation
Another important beginning step to forming your business is draft and file the Article of Incorporation. When you file this important document, your California corporation is now lawfully created. When you file, make sure to include:
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Shares
Include the number of shares the corporation is authorized to issue.
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Agent’s Name
Include your agent’s name and address (no post office boxes) and the company’s authorized number of shares that they can issue
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Company Information
Include the name and address of your company and other pertinent contact information.
Do not forget your Mail Submission Cover Sheet and the statement of purpose on the website. Make sure to utilize the Mail Submission Cover Sheet.
The Article of Incorporation may be filed online. There is a filing fee for these articles of $100.
Step 5: Draft Corporate Bylaws
What are bylaws, anyway? They are documents, both internal and corporate, that establish the fundamental guidelines for running your business. These documents need not be filed in California, so do not worry about that.
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Bylaws are Key
While it is true that your business is not required by law to possess these corporate bylaws, we recommend that you institute them. Why?
- A company needs a code to live by, and bylaws act as rules that everyone will be aware of
- Bylaws provide notice to entities such as the Internal Revenue Service, banks, other creditors, and other companies that your business is authentic.
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Keep Records of Everything
Our business lawyers also recommend that you keep careful records and copies of the corporations’ crucial papers. These include records of all meetings, such as shareholder and director tasks and gatherings. It is as simple as having a binder or folder for paper copies, as well as making sure your digital records are not only stored but backed up. We’ve seen many businesses lose track of their sales and records—make sure you keep a record of everything. We also recommend using some sort of cloud service as backup, too.
Step 6: Board Meetings and the Appointment of Directors
You’re very close to forming a California corporation. Now, let’s make this official!
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Identify your Incorporator
First, you’ll need to figure out who your ‘incorporator’ is. What or who is an incorporator? This is simply the individual who has signed the documents for your business. This person now needs to appoint the first corporate directors. These directors will be a part of the board in the time before the first shareholders’ meeting. During this meeting, upcoming elections will take place.
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Duties of the Incorporator
What else does the incorporator need to do? He or she must write the “incorporator’s statement.” This statement includes the official addresses and names of the directors of your California corporation. It is integral that the incorporator signs the document. A copy must be put inside the book of corporate records, as well. However, this particular statement does not necessitate filing within the state of California.
Step 7: Hold the Initial Board of Directors Meeting
You need to call meeting of the Board of Directors. During the board of director’s meeting, you’ll need to:
- decide on the corporation’s first fiscal year
- issue stock shares
- choose a corporate bank to do business with
- choose bylaws and adopt them
- choose a form of certificate/corporate seal
- choose corporate officers
If your corporation is an S-corp, you’ll also legally recognize this structure (the directors will do this).
Step 8: Stock Options
Whether it is cash or services, or perhaps property, shareholders contribute to your California business. Sometimes, they can contribute to all three of these. It is normal for small corporations to issue certificates of paper stock; however, please be aware that this practice is not legally required in most states. When you form your corporation in California, you are also not required to establish par value. Instead, the board will set the number of shares and the value of the stock.
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Keep a Ledger
Remember: enter each shareholder’s name and contact information in your California corporation’s ledger. Keeping careful records of your business and the stocks involved in your California corporation will no doubt help your business to succeed.
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Stocks and Securities
Part of your stock, or a share, is labeled a ‘security,’ and this is due to federal security laws, as well as those from the state. These laws standardize the selling of your corporation’s stock. Note: selling stock to 35 people or less (a limited amount) in a non-standardized manner is exempt under federal law and known as a ‘private offering.’
Therefore, if your California corporation issues shares to less than 35 people, you will not need to consider the pertinent laws; federal, state, or otherwise.
Note: remember to file this notice 15 days past the time when the stock is issued by your corporation or under this. If you have other questions about this process and want to make sure that you get it right, please get in touch with the business lawyers at Nakase & Wade.
Step 9: Draft and File Corporation’s Statement of Information
Next, let’s discuss an important part of forming your corporation in the beautiful state of California: filing your statement of information.
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A) File the Forms
Every California corporation, whether foreign or domestic, must file the Statement of Information which can now be done online. You can complete this entire process online, or you can print it at home and snail-mail it. Otherwise: drop it off at the correct office. What else do you need to know here?
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Pay the Fees
- -The fee for filing is $25
- -You must file this within or after 90 days of filing to incorporate your business
- -You also must file this statement each year during the correct period, which occurs during the month, or five months before the month when you initially filed.
Step 10: The Necessary Tax Requirements
Corporations are required to make an $800 minimum tax payment; this is the tax fee you are responsible for. This tax is paid during each respective period of accounting at the start. Whether the corporation does business or not, makes profits or not, or stays active, this tax must be paid.
Businesses located in the state of California, as well as foreign corporations, are required to pay their respective taxes to the state of California’s Board of Taxation.
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How Taxes are Measured When you Form a Corporation in California
How is this annual minimum tax measured? For corporations that are brand-new and that have been incorporated, this amount is based on the income and estimate requirements after the initial year. After this and for the remaining years, the tax will be $800 at minimum.
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Additional Taxes
What additional taxes might you owe on the new corporation you are forming in California? Let’s say your new corporation registers income over a certain level. You will need to deal with an additional tax fee, which logically is based on the total of your annual income.
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Specific Procedures
What are the specific procedures, and how do you file? The law dictates that it is necessary to file CA Form 100. This required return must be completed by the middle of the month or after the end of the taxable year.
If you’d like more information about these procedures, there are some great resources on the web; check out the official state taxation website for answers to your questions. And, if you still need help, please let us know at California Business Lawyer and Corporate Lawyer.
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Getting a Tax Number
What else do you need to know to form your California corporation? Similar to any other corporation, you must procure a FEIN. Good news: you will not be charged a fee for this; you simply need to visit the website of the Internal Revenue Service. Soon, you’ll be on your way to forming your corporation in California.
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Payroll Tax
The last detail of this first part is to be aware of the California Employment Development Dept. When your corporation pays salaries over $100 during any quarter of the calendar, you must now pay California’s payroll tax. Even if you do not have employees and only have a president, this rule is still applicable. For more information regarding this matter, feel free to consult our business attorneys & corporate lawyers at Nakase Wade.
Is your California Corporation an S-corporation? No sweat! You’ll file form 100S.