To form a corporation in California, you need to take the steps set forth below. You can also use Nolo's Online California Corporation service, which will form a corporation for you, providing you with everything you need including a corporate name check, articles, bylaws, a corporate records book, an incorporator's statement, minutes of the first meeting of the board of directors, stock certificates, and a stock transfer ledger.
Your corporation's name must not be the same as, or too similar to, an existing name on the California Secretary of State's records, or misleading to the public. The corporation's name may—but need not—include the words "Corporation," "Incorporated," or "Limited" (or an abbreviation of one of those words).
You can do a free preliminary check on the availability of a name through the Business Search database or you can mail a completed Name Availability Inquiry Letter to the California Secretary of State’s office in Sacramento. Email or online inquiries are not accepted.
You can reserve a name for 60 days by filing a Name Reservation Request Form with the Secretary of State. The form must be filed by mail or in person.
Your corporation is legally created by filing Articles of Incorporation-General Stock (Form ARTS-GS) with the California Secretary of State. Your articles must include: the corporate name; the corporation's street address and mailing address if different; the name and street address of an agent for service of process (not a post office box address); and the number of shares the corporation is authorized to issue. The articles on the Secretary of State's website include a broad purpose statement. You must include the Mail Submission Cover Sheet when you file your articles. Filings can only be done by postal mail or in person and there is a $100 filing fee.
Every California corporation must have an agent for service of process in the state. This is an individual or corporation that agrees to accept legal papers on the corporation's behalf if it is sued. A corporation may not service as its own agent for service of process. The agent should agree to accept service of process on your corporation's behalf prior to designation.
The agent may be: (1) an individual who resides in California, or (2) a corporate agent that has filed a Registered Corporate Agent for Service of Process Certificate (Form 1505) with the Secretary of State. The agent must have a physical street address in California, not a post office box. Small corporations typically name a director or officer to serve as the initial agent. A different agent can always be named later.
The Secretary of State maintains a list of private service companies that can act as the agent for service of process; however, not all such companies are on the list.
Set up a corporate records book in which you keep all of your corporation's important papers, including minutes of director and shareholder meetings, stock certificates, and stock certificate stubs. Keep your corporate records book at the principal office of your corporation. You can use a three-ring binder as the corporate records book or you can order a special corporate records kit through a corporate kit supplier.
Bylaws are an internal corporate document that set out the basic ground rules for operating your corporation. They are not filed with the state. Your corporation is not legally required to have corporate bylaws, but you should adopt them because they (1) establish your corporation's operating rules, and (2) help show banks, creditors, the IRS, and others that your corporation is legitimate. For corporate bylaw forms, see Nolo’s website or How to Form Your Own California Corporation, by Anthony Mancuso (Nolo).
The incorporator—the person who signed the articles—must appoint the initial corporate directors who will serve on the board until the first annual meeting of shareholders (when the board members who will serve for the next term are elected by the shareholders). The incorporator must fill in an “Incorporator’s Statement” showing the names and addresses of the initial directors. The incorporator must sign the statement and place a copy in the corporate records book. The statement need not be filed with the state. For a sample Incorporator's Statement, see Incorporate Your Business, by Anthony Mancuso (Nolo).
The first meeting of the corporation's board of directors should be held at which the directors can appoint corporate officers, adopt bylaws, select a corporate bank, authorize issuance of shares of stock, set the corporation's fiscal year, and adopt an official stock certificate form and corporate seal. The directors' actions must be recorded in corporate minutes prepared by the incorporator or any of the directors. Additionally, if the corporation will be an S corporation, the directors should approve the election of S corporation status. For corporate meeting minute forms, see Nolo’s website or refer to Incorporate Your Business, by Anthony Mancuso (Nolo).
Issue stock to each shareholder. Although not legally required in most states, small corporations usually issue paper stock certificates. Enter each shareholder's name and contact information in the corporation's stock transfer ledger.
A share of stock in your corporation is classified as a security under state and federal securities laws that regulate the offer and sale of corporate stock. However, the federal government and all states exempt most small corporations from these laws. For example, federal law exempts "private offerings:" a non-advertised sale to a limited number of people (generally 35 or fewer). Most states have enacted their own versions of this SEC exemption. To claim a limited offering exemption under state law in California, you must file a Section 25102(f) Notice Filing - Limited Offering Exemption Notice (LOEN) with the California Department of Business Oversight.
Visit your state securities office website for information about your state's securities laws. Links to all such offices can be found at the Contact Your Regulator web page of the North American Securities Administrators Association.
All California corporations and foreign corporations doing business in California must pay California taxes to the California Franchise Tax Board (FTB).
Annual minimum tax: An $800 annual minimum tax must be paid during the first quarter of each accounting period whether the corporation is active, operates at a loss, or does not do business. For new corporations that qualify or incorporate with the Secretary of State, the tax is measured based on their income for the first year and subject to estimate requirements. For all subsequent years, the minimum tax is $800.
Additional taxes: Corporations with income over certain levels must pay an additional fee based on their total annual income.
Filing procedures: Regular corporations must file California Form 100, Corporation Franchise or Income Tax Return, by the 15th day of the third month after the close of their taxable year. Corporations that have elected to be taxed as S corporations file Form 100S, California S Corporation Franchise or Income Tax Return. For details and forms, see the California Franchise Tax Board website.
Additional tax and regulatory requirements apply to your corporation. These include:
EIN: Your corporation must obtain a federal employer identification number (EIN). You may obtain an EIN by completing an online application on the IRS website. There is no filing fee.
S Corporation Filing: If the corporation wants to elect S corporation status for tax purposes, it must submit Form 2553 Election by a Small Business Corporation (signed by all the shareholders). The election should be filed within two months and 15 days after the beginning of the corporation's first tax year. See the IRS S Corporation Fact Sheet for details.
Business Licenses: Depending on its type of business and where it is located, your corporation may need to obtain other local and state business licenses. Visit the CalGold Business Permits Made Simple website for more information.
California Employment Development Department: A California corporation becomes subject to the state's payroll tax requirements if it pays wages of over $100 in any calendar quarter. This rule applies even if a corporation operates without any employees except for the corporate president. The California Employment Development Department issues employer account numbers (sometimes called state employer identification numbers or SEINs) and administers California's payroll taxes, including Unemployment Insurance, Employment Training Tax, State Disability Insurance, and California Personal Income Tax withholding. For details, see the EDD website.
Every California corporation and foreign corporation registered in California must file a Statement of Information with the Secretary of State:
To do business in California, all corporations organized outside of the state must register with the Secretary of State. Foreign corporations must appoint a registered agent for service of process physically located in California. To register, file the Statement and Designation by Foreign Corporation - Stock form. The form may be filed by mail or in person. The filing fee is $100.
If the name of the foreign corporation is not available for use in California, the corporation must qualify under an assumed name—a name other than the true corporate name. List the assumed name in the statement.
The completed form must be accompanied by a certificate of good standing from the foreign corporation's home state, dated not more than six months prior to the filing of the statement.