Although certain business structures might suit the needs of both the business and the owner in a host of different ways, it’s always good to be well-informed about what a corporation is and how you can start one. Although the following will only cover how to start a corporation in California, we can briefly review what a corporation is and how the structure is different from that of Limited Liability Companies (LLCs), Partnerships, and nonprofits.
What is a Corporation?
Depending on the state in which you reside and local regulations and business law, a corporation by definition is a legal entity that is identified by both state and federal entities. Corporations are open to being taxed, but in recent times, more questions have been raised about “double taxation.” This means that both person(s), officers, owners, and shareholders will be taxed on their profits received from the corporation, and the corporation will be taxed as well.
Federal law sees a corporation as a separate and legal structure that can undergo juridical means if needed, such as being sued, suing other companies or individuals, and being personally liable for any debts amounted by the corporation.
California offers great benefits for those looking to form a new corporation. Read more in our extensive online guide.
Here is a concise step-by-step guide on how to form a corporation in California
Name or create a new name for your corporation
Following certain naming guidelines and rules outlined by the State will ensure that your new name complies with the requirements. Some requirements include that your new name must contain the word, ‘corporation,’ ‘company,’ ‘incorporated,’ ‘limited,’ or perhaps the abbreviated version thereof.
Additionally, your new corporation name cannot be that of which is already registered and filed with the Secretary of State, which is why a full name search on California’s SunBiz Website is needed beforehand.
You can also name search with the Secretary of State, or perhaps make a reservation for a chosen name for a fee of $10. The reservation will be active for 60 days.
Assign a California Registered Agent
A registered agent or service of process is a named individual, company, or third-party who will be responsible for all legal and tax documents, filing, and liaise between the business and government entities. A registered agent is required in the state of California, and thus it is important that you choose or assign a trusted individual or third-party.
Your registered agent will represent your business or corporation on your behalf in California, and it should in some cases be someone who is resident within the state.
Choose Initial Directors
Directors of any corporation in California are responsible for the adoption, amendment, and repeal of the operational bylaws. More so, directors also oversee the election and removal of officers. For your new corporation, state laws require you to assign an initial director, who will act on behalf of your corporation until its first shareholder meeting is conducted.
Depending on how big the corporation is, and the number of directors, it’s important to note that all names, and addresses od directors should be captured in your California corporation record books.
File the Articles of Incorporation with the Secretary of State
After you have completed your “Incorporator Statement” and have compiled the necessary documentation, you can now file your articles of incorporation.
Your files of incorporation should include your corporate name and primary address, service of process agent and street address, incorporator name and address, and the number of authorized shares the corporation will issue.
Additionally, your articles of incorporation for your California corporation will also need to disclose some other, more basic business details and information. The filing fee is $100 and can be mailed or in-person delivered to the Secretary of State. For more information on local guidelines and regulations, visit the SunBiz website.