Starting an Inc. in California

Step 4: Stock Options

You’ve started an Inc. in California, but when can you issue stock? An exciting time for any new business occurs when it is time to issue stock. When it is time for the California corporation you have created to distribute stock to your shareholders, you’ll want to make sure to do it the right way. Think of it this way: the principal owners of your business are holders of shares; this makes them, you guessed it: shareholders! These owners receive stock to show that they are acting as parts of the corporation. This stock can only be issued when approved by the Board, and the Board also sets the stock price.

• Stocks: Important Guidelines

1. Remember that whenever you sell a stock, federal and state laws concerning securities are applicable
2. Remember that many small companies (with small distributions of stock) can take advantage of what we call a “private placement” exclusion from some securities laws
3. For the purposes of creating your California corporation, you need to file with the proper state authorities online.
4. When selling your company stock to investors, complications arise. Contact a corporate lawyer.
5. In payment of stock, shareholders are able to provide services, cash, and/or property

We recommend keeping track of all stock issuances in a notebook or ledger or using an online tracking tool. For example, one of the worse thing for a Los Angeles business to get involved in is a partnership dispute concerning stocks which means you would need to hire a Los Angeles business litigation attorney.

Step 5: Important Articles for Starting an Inc. in California

The Articles of Incorporation are official documents that serve to legally create your California corporation. That makes sense, right? You will need to file this document with the Secretary of the State of California—or wherever you are starting your business. Most small businesses with only one share class use California Form ART-GS to do this.

• What’s In the Articles

Let’s look at the most important pieces of the required information and remember: these articles are usually brief and to the point; think no longer than 2-3 pages.

1. The name of your business
2. The address of your business (Note: no P.O. Boxes allowed)
3. The purpose of your business (you will find that there is a boilerplate clause that many in California use
4. Capital that has been authorized to use: the number of shares the company has and the categories of the stock
5. Registered agent, including name and address
6. Other provisions unique to your business, any special clauses
7. Signature of the incorporator
8. Additional fee for the state (In California, the fee for submitting this document is $100).

Step 6: Coming Up with A Name

An often overlooked aspect in starting an Inc. in California is the choice of a name. Yes, this is a little bit more creative and abstract than submitting your formal articles; but it is just as important.

• What’s in a Name?

The name or title of your California corporation is your company’s window to the world. It is the way in which the world knows who you are, what you stand for, and what it is you do. Choosing a name that works with the style and ethos of your company can have a strong bearing on the success of your business. On the flip side, not taking this process seriously, and not doing your research, could mean that you need to change your name, or worse, you use a name that does not belong to you and are sued.

We’ve helped many corporations through this phase, and we do have some basic guidelines we’ve culled from our experiences. However, remember this: the choice of title for your business is yours and yours alone.

• How to Choose the Name of Your Incorporated Business

First, try to have some foresight. A solid name is not only reflective of the company you are in now, but the business you wish to become. Facebook was not called the “Book of College Faces” when it was started, yet that was its first incarnation. Sometimes it helps, with this step, to eschew anything that is too specific or too general.

One of the first things that you should do is check the status and availability of any and all domain names you are interested in. Services such as GoDaddy, and others, can help with this.

Spelling is key, especially for your audience. If your name is too complex or you think people might have trouble with it, move on down the line.

You’ve found the perfect name, but you are nervous it will not last long? (Usually, this is when we hear the line: “How is this not taken?” Well, consider filing a trademark application with California or the USPTO; this way, it will be instantly protected from imitators!

As we said, it’s important to do your research. There are some words that are forbidden from public or private usage without possession of a license. Usually, these words are trademarked by banks, insurance agencies, and credit unions.

Likewise, names can have misleading connotations and denotations. They can even signify unintended bias. So, the point here is to be aware.

• California Rules for Names of an Inc.

Here in California, your company name is required by law to include either:

• Incorporated
• Inc
• Corporation
• Corp
• Limited (or LTD.)

Naming Tips

Didn’t know this step would prove to be so complex? Let’s finish up with a small breakdown of a few more tips:

1. Get Digital

Use the internet (search engines and other resources) to ensure that the brand-new name for your California corporation does not already belong to a different company.

2. Contact the P.O.

Companies are required to federally trademark their titles, and you can check the U.S. Patent online database to check.

3. State Search

In California, you can easily conduct a name search for eligibility on this state website.

4. Plan it Out

If you are set on operating your corporation under a name that is unique to the corporate name you register under, you will use the label ‘DBA,’ otherwise known as ‘doing business as.’

Whatever name you choose, if you follow these guidelines, you should be able to enjoy a long career in business, and that is the name of the game!

Step 7: Find an Agent of Process

As you continue the process of starting an Inc. in California, you will absolutely need to identify and register what is known as an ‘agent’ or ‘registered agent.’ No, we’re not suggesting you head to Hollywood. Let’s simplify this idea:

• Registered Agent

Before you can begin the exciting prospect of conducting your business, you need to have someone in place to help you with the process itself. How can an agent help you? Whomever you choose will:

1. Be a business entity or individual
2. Be able and authorized to conduct business in California
3. Will receive tax information and legal updates, and information on your corporation’s behalf

So, how do you choose this individual or entity? The choice may seem a little overwhelming, but don’t worry: we are here to help and consult.

• Agent Requirements

The Agent Should be:

1. A California resident
2. A service company responsible for registered agents
3. A shareholder, officer, or director of your Inc.

The Agent Should Have:

1. A legitimate address in California (no P.O. Boxes)
2. An address listed in public records
3. Availability during normal work hours (9-5 is typical, but this is subjective to your business, of course!)

• Why Do You Need a Registered Agent for your Business?

Registered agents are a large part of the process of incorporating your business. This person or entity is selected on the grounds that they will accept mail for your business (official mail) and also receive any services towards your company. For example, if someone takes legal action against you, the agent will be there to accept this action.

If you are wondering why this agent is necessary—you are not alone. Many business owners think to themselves: can I simply be the agent? Do I really need one? The answer is that many states require this agent to be appointed, and California is one of these states.

If you are not sure who to appoint, there are online services and websites that were started to help you with this search if you wish to pay for their services. But why would you want to use what is known as an ‘outside agent?’

• Outside Agents

Outside Agents can:

1. Help maintain the privacy of your business
2. Help you if you wish to start a corporation in a different state, and need to maintain an address in California

If you have additional questions about the topic of registered agents, do not wait: get in touch with our business attorneys today. We can help with all of your questions about starting an Inc. in California and everything that arrives with that process.

Step 8: Board of Directors

As you probably know, now that you are starting an Inc. in California, you’ll need to set up a board consisting of directors. What does the Board do? The Board is there to direct and run the business; therefore, make improvements, deal with changes, and other directives and issues that arise. Your incorporator will be the individual to appoint the first directors of the Board, and this is done by filling out a completed statement.

The Board will be the soul of your company, the basis for many important decisions throughout the life of your newly created corporation. The Board will also meet regularly. If over the life of your business, you need to replace a director, then the shareholders will meet and vote about this matter.

Who can be on the Board?

In California, there is:

1. no minimum age
2. no experience qualifications or background qualifications
3. no required residency

Board Requirements:

If your corp. has one shareholder, it needs to have one director, at least

If your corp. has two shareholders, it will need two directors, at least

And so on.