How to Start a corporation in California

The first step will be to decide on a name for your business. Choose a name that is memorable and unique, easy to understand and pronounce, and accurately represents your business. When picking out a name, remember to conduct a name search to find out whether it is available. Jot down one or two alternatives, in case the name you settle on is not available for registration in California.

There are a few rules that California Corporations must follow in order to register a name.

1. First and foremost, the name you choose must be unique and not "deceptively similar" to the name of any other California business. This is to prevent fraud or misrepresentation and is a common rule in all 50 states. You can find out whether a name is available in California by searching the California Secretary of State business entity database Opens a new window for possible conflicts. Be sure to check variations or alternate spellings, otherwise your filing may be rejected. You can also utilize MyCorporation's business name search service. Our team of skilled professionals will conduct a thorough search on your behalf and report back with the name's availability. As an added bonus, when you complete your filing for corporation in California with MyCorporation we also include a business name search for free.
2. California corporations are not required to include a corporate indicator along with the name of their business. However, if you which to include one, some possibilities may include: Incorporated, Incorporation, Corporation, Company, Corp, Inc, Co, Ltd, Limited, PC, and Professional Corporation.
3. Your business name may not contain restricted words such as "bank," "trust," or "trustee" unless the certificate of approval of the Commissioner of Business Oversight is attached.

You can learn more about business name entity rules and regulations in the business name guidelines and restrictions (PDF)(126 KB) provided by the California Secretary of State. Once you have chosen your name, you can reserve it for 60 days by filing a name reservation request with the California Secretary of State if you are not ready to file right away.

Most states require that you designate a registered agent for your business, and California is no exception. A registered agent (often abbreviated as RA) acts as the state's means to communicate with a business. An RA is responsible for receiving legal and official documents related to the business. This may be an individual or third party service that agrees to accept legal papers on the corporation's behalf. A corporation may not act as its own registered agent for service of process.

A registered agent can be any individual who resides in California, or a third party registered agent service like MyCorporation who will act as a registered agent on behalf of the business. The agent must have a physical street address in California, and a P.O. Box is not accepted. In many cases, smaller businesses will designate a director of officer of the corporation to serve as the registered agent to start and select a new agent later when the business grows.

Registered agent information is publicly available. This may cause privacy concerns for business owners who do not wish to list their personal contact information for everyone to see. It is also common for the registered agent to become a target of spam or robocalls since this private information is relatively easy to obtain.

Registered agents are highly valued for their discretion. For example, if you did not have a registered agent and your business was served with lawsuit paperwork the documents would be delivered directly to your business address. This could be incredibly embarrassing for the business owner, especially if this happened in front of customers. An RA will accept the documents privately to ensure additional privacy, organize the materials, and then deliver them to the business owner.

This is why many business owners opt for a third-party registered agent service like MyCorporation to act as a registered agent on behalf of their business.

The state of California requires you to file Articles of Incorporation in order to legally create a Corporation. The Articles of Incorporation is a simple one page form (Form ARTS-GS) that contains all of the basic information required to register your business. A standard filing fee of $100 must be included along with your application along with the mail submission cover sheet submitted by mail. For the return address, enter the name of a designated person and/or company and the corresponding mailing address. If you would like to expedite your filing, you will need to submit the documents by hand to their designated address in Sacramento, along with a separate, non-refundable $15 drop off fee.

Once your Articles of Incorporation have been accepted by the California Secretary of State's office, your business is officially formed.

What information should be included in the Articles of Incorporation?

The information required in the Articles of Incorporation are your basic business details, including the corporation's name, the corporation's principal business address, registered agent, business purpose, and the number of shares the corporation is authorized to issue. Authorizing is the same as creating. For example, when you authorize 50 shares you are creating 50 shares of stock.

Corporate bylaws are a detailed set of rules agreed upon and adopted by the board of directors after a corporation is formed, that specify the internal management structure of the corporation. They are typically drafted by the corporation's founder or directors. Corporate bylaws are not submitted to the state.

Although it is not a legal requirement, it is highly recommended that businesses create bylaws for their California corporation. Bylaws allow a business to maintain consistency in the way it operates, and communicate organizational rules to help avoid conflicts and disputes. They cover how directors are elected, meetings are organized, and officer roster and summary of duties. In addition to management, bylaws specify details about ownership rights, annual meetings, and the addition or removal of officers and directors.

If you are not sure how to create corporate bylaws, you can purchase MyCorporation's customized Minutes and Bylaws Package. This kit provides you with the internal documents required to fulfill your corporate formalities and properly operate your business after incorporating.

The board of directors of a corporation are normally elected by the shareholders. However, for a new business, the incorporator (the person who signed the Certificate of incorporation) will often designate the initial directors if there are no initial directors named in the certificate of incorporation. This is done by creating the "Statement of Incorporator" which will list the names and addresses of the initial directors of the business.

The statement of incorporator is then signed by all of the incorporators, which passes all elements of control over to the initial directors. This is filed not with the state, but in a corporate minute book of the incorporation. It is kept as part of the corporate record.

The first meeting of the board of directors is an important time in the life cycle of a corporation. During this meeting, the initial directors of the business will adopt the corporate bylaws, set the fiscal year, and appoint corporate officers. It is also common to authorize the issuance of shares of stock to the founders of your company, usually in exchange for assets.

This meeting, and all future meetings of the board of directors, must be recorded in corporate minutes. Minutes are documents that detail what was discussed and any decisions the business makes during meetings. They are stored with the corporate records.

Corporate minutes are required for all California corporations by law. Falling behind on keeping and maintain minutes can jeopardize the corporation's liability protection and overall tax advantages. It is important to maintain updated corporate minutes and keep copies of all the signed and approved minutes or actions by unanimous consent from any special or annual meetings of the corporation's shareholders and directors.

Stock is a representation of ownership in your corporation. When your shareholders purchase stock, they are buying a small piece of your business. Although it's not legally required, it is common that most corporations will issue paper stock certificates to their shareholders.

In a private company (not publicly traded on the stock market), you can set the value to each stock however you see fit in your corporate bylaws. For example, one share could be worth $10 or $10,000, either would be completely acceptable. If you have additional questions, you may contact the California Department of Business Oversight to learn more.

Within 90 days of filing the Articles of Incorporation with the California Secretary of State, a Corporation must also file an initial Statement of Information (Form SI-550 or Form SI-550A) along with a $20 fee, plus a $5 disclosure fee (domestic stock corporations only).

The statement must include the following general information about the corporation:

• The name of the Corporation and the California Secretary of State file number
• The registered agent's name and address
• The address of the principal office of the business
• The mailing address of the business (if different from the principal office)
• The names and addresses of the directors
• The principal business activity (like a retail store, advertiser, etc.)

The required Statement of Information for most corporations can be submitted electronically and is generally processed in one business day. Paper statements should be directed to the Secretary of State's office in Sacramento either by mail or dropped off in person.

The Statement of Information is filed every year after that, calculated from your incorporation date, with the same information. This allows the California Secretary of State to keep your business file up-to-date in its records.

In California, all businesses are required to file for a general business license (sometimes referred to as a business tax certificate). Business licenses are issued by cities and municipalities, and every city in California differs in their requirements. If you plan on operating your business in multiple cities, you will need to apply for a business license in each location. Some additional permits may be required in addition to a general business license, which may need to be filed with the county or the state. You can find out about the specific licenses applicable to your business by checking with the city offices where you will conduct business, or by using MyCorporation's business license compliance package. Our team of skilled professionals will identify the licenses required by your business and provide you with all the information you need to file.

In a pinch, you can also check out CalGold. CalGold Opens in a new window helps businesses find appropriate permit information. Keep in mind that CalGold does not issue permits or licenses directly to businesses. However, they do provide contact information that allows entrepreneurs to reach out to the appropriate agency contact for administering and issuing out permits.

An EIN (also referred to as a Federal Tax ID) is a nine-digit number that is issued by the IRS and used to uniquely identify your business for tax purposes. Think of it as a Social Security Number (SSN) for your business, except an EIN is less sensitive. It is important to wait until the LLC has been approved by the state before applying for an EIN. For that reason, filing for an EIN is one of the last things to do when you are setting up a business.

• Open business checking, savings, or investment accounts
• File taxes for the business
• Complete payroll for employees if applicable
• Obtain lines of credit and credit cards, as well as "build credit" for your business
• Apply for applicable business licenses when required.

You will only need a few pieces of information to file including your mailing address and legal business name. You can apply online Opens in a new window with the IRS by downloading IRS Form SS-4 (PDF)(116 KB)Opens in a new window, or work alongside a third party organization like MyCorporation to complete an EIN application.

If a California corporation pays more than $100 in wages to employees each calendar quarter, you'll need to obtain a State Employer Identification Number, or SEIN. You'll need to register with the California Employment Development Department Opens in a new window (EDD).