Form a California Corporation
Incorporate in California with the California incorporation experts. Form a California corporation online now. California incorporation has never been easier. As a law firm, we do what others cannot. Every California incorporation comes with a free California attorney consultation. We will assist you with forming your California corporation, the right way. To get started, simply click on “Order Now.” Please feel free to call us, anytime, with any questions.
Incorporating in California
Incorporating in California can be vital to businesses based of California. At LawInc, we prepare your California corporation Articles of Incorporation, bylaws, stock certificates, stock ledger and more. We can even obtain your California corporation Tax ID number and file your S corporation election with the IRS. Incorporate in California quickly and affordably with LawInc.
California Incorporation Information
The following California incorporation information will likely be helpful when deciding to incorporate in California.
California Corporation Name
The first step in forming an California corporation is selecting the business name. California corporation names:
- Typically include the word “corporation,” “corp.” “company,” “co.,” “incorporated,” or “inc.”
- Cannot be deceptively similar to, or similar to the name of any existing California Corporation or California foreign corporation, or any California corporation name reservation filed with the Secretary of State.
There is no statutory requirement for a corporate ending. However, the name of a person may not be used as a corporate name without the addition thereto of a corporate ending or some other word or words which show that the name is not that of an individual alone.
An available California corporation name may be reserved for a 60-day period.
LawInc.com permits you to choose up to three names and will conduct a name search for your California corporation, prior to filing.
California Corporation Formation
California Filing Procedure: To incorporate in California, you must file a California Articles of Incorporation with the California Secretary of State.
The California Articles of incorporation should include:
- California Corporation name.
- Number of California corporation shares to be issued.
- California Registered agent address.
- Name and address of the California incorporator.
California Corporation Authorized Shares: There is no minimum or maximum number of authorized shares since state California incorporation fees are not based on the share structure.
California Incorporator: Minimum number of California incorporators is one (1) - natural persons, partnerships, associations or corporations, domestic or foreign, may form a corporation and there is no requirement that the California incorporators be a resident of California.
California Corporation Purpose: The purpose of the California corporation must state the following: “The purpose of the corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code.” The articles should not set forth any further statement with respect to the purposes or powers of the corporation, except by way of limitation or except as expressly required by any law of the state of California other than the California Secretary of State or any federal or other statute or regulation (including the Internal Revenue Code and regulations thereunder as a condition of acquiring or maintaining a particular status for tax purposes).
California Corporation Indemnification Protection: The CA Sec. of State allows addition of special provisions in your Articles of Incorporation and agreements which trigger this important protection requiring the Corporation to indemnify and hold harmless its Officers and Directors from any actions they take on behalf of the Corporation. Should an Officer or Director ever be sued for actions taken on behalf of the Corporation, these provisions require that the Corporation be held responsible, as agreed upon by the Directors and Officers. Only applicable in State of California.
California Corporate Directors: The minimum number of California corporation directors is 3, unless there are fewer than 3 shareholders, then the number of directors may be equal to, but no less, than the number of shareholders.
California Corporation Stock: Shares of stock in a California Corporation do not require a statement of the par value of any shares or a statement that any shares are without par value. There is no minimum amount of paid in capital required to commence business. Prior to selling California corporation stuck, corporations must comply with the Corporate Securities Law administered by the California Department of Corporations. For more information visit the California Department of Corporation’s website at www.corp.ca.gov.
1244 Stock: Election to have stock classified as IRC Section 1244 stock allows for a substantially larger application of the deduction from business losses to ordinary income than regular stock. With regular stock, you can only offset $3,000 against ordinary income. With the issuance of Section 1244 Stock, the corporation can claim an ordinary loss deduction of as much $100,000.
California Registered Agent: An California corporation must maintain a registered agent and office to receive service of process in California. The California registered agent should be available, at an California physical address, during normal business hours to accept important legal and tax documents on behalf of the California corporation. The registered agent can either be (1) an individual with a physical California address or (2) a corporation authorized to serve as registered agent that complies with California Corporations Code section 1505. A corporation cannot act as its own agent.
California Corporation Limitation of Directors’ Liability: The California articles of incorporation may contain, within the limitations prescribed by the California General Corporation Law of California, provision eliminating or limiting the personal liability of a director to the corporation or its stockholders for monetary damages for the breach of fiduciary duty as a director.
California Professional Corporation: California Professional corporations are corporations organized for the purpose of providing professional services. Typically, professions that require a license, such as doctors, lawyers, chiropractors, accountants, architects, or engineers are required to form professional corporations. Typically, professional corporations must be organized for the sole purpose of rendering professional services of the licensed practitioners.
California Corporation Post-Filing Requirements
California Statement of Information: Newly formed corporations must file a California Statement of Information (Domestic Stock Corporation) within 90 days after the date of incorporation. The California Statement of Information requires the disclosure of the names and addresses of the directors and principal officers, the address of the California corporation’s principal office, the name and address of its agent for service of process, and the number of authorized directors.
California Limited Offering Exemption Notice: After a forming a California corporation, a Limited Offering Exemption Notice (LOEN) should be filed pursuant to California Corporations Code Section 25102(f). California corporations are allowed to offer or sell shares of stock (securities), without complicated filings and qualifications, pursuant to Section 25102(f) as long as the following requirements are met: 1. The sale of stock is made to 35 or less people, including out-of-state purchasers; 2. Each purchaser either has a preexisting personal or business relationship with the company and/or its owners, officers or directors, or has sufficient business or financial experience to be deemed a ”sophisticated” purchaser; 3. Each purchaser is buying shares of stock for their own account and not for purposes of reselling; and 4. The offer and sale of stock is not made through any publication or advertisement. If your California corporation qualifies for a 25102(f) exemption, you must electronically file a Limited Offering Exemption Notice within 15 days from the date of issuance and pay the appropriate fee to the California Department of Corporations. It can easily be filed online: http://www.corp.ca.gov/LOEN/default.asp.
California Corporate Minutes: California corporations are required to hold and document annual shareholder and director meetings.
Annual California Corporation Franchise Tax: A California general stock corporation is a taxable entity and subject each year to an $800 minimum franchise tax, starting the second calendar year of existence. For further information regarding franchise tax requirements, refer to the Franchise Tax Board’s website at www.ftb.ca.gov
California Corporation Taxes
California Corporation Taxes: The California state income tax rate is currently 8.84% of net income. The minimum tax is $800, which is waived during the first fiscal year.
California C Corporation: All California corporations formed by default are "C" corporations. A California C corporation is a California corporation that has not made an election to be an "S" corporation. The term C corporation is specifically used because the entity is taxed under subsection C of the IRS code. California C corporations are taxed at two levels ("double taxation"). This means that the corporation itself pays its own tax when it makes money (the first tax). The owners or shareholders are then taxed again when they are paid a salary or dividend by the corporation (the second tax). Despite double taxation, California C corporations offer many planning and benefit opportunities.
California S Corporation: A California S corporation is a corporation that has made an election with the IRS to be treated for tax purposes as a "pass-through entity." This means that corporate profits and losses are passed through to the shareholders (owners) who report them on their own personal tax returns and pay the tax at the individual level. The corporation pays no federal income tax at the corporate level. California S corporations are not subject to the double taxation C corporations encounter. The State of California recognizes S corporation status. California does not require a state election. However, California S corporations are still subject to a separate 1.5% S corporation fee, which is based on the corporation's net income.
These are the 3 main advantages of forming a California S corporation:
No double taxation: One of the main advantages of S corporation status is that it avoids the double taxation that occurs with a regular C corporation. In a C corporation, the corporation pays income tax on its profits and, if those profits are distributed to shareholders, the shareholders pay income tax on the distribution.
Loss deductions: The availability of losses. Shareholders of an S corporation generally may deduct their share of the corporation's net operating loss on their individual tax returns in the year the loss occurs. Losses of a C corporation, however, may offset only the corporation's earnings.
Self-employment tax savings: By electing S corporation status, only the earnings actually paid out to you as salary are subject to payroll taxes; money left in the business is not subject to payroll taxes or self-employment tax. All income passes through, but its tax status depends on whether it is classified as salary or ordinary income.
Federal Tax Identification Number/Employer Identification Number (EIN): The Federal Tax Identification Number, also known as the Employer Identification Number (EIN) is a number that is assigned to a business by the Internal Revenue Service. An EIN is like a Social Security Number for a business. It is a requisite for certain business functions such as opening bank accounts or hiring employees. All California corporations should obtain an EIN.
California Corporation Dissolution
State of California Dissolution Requirements: A California corporation can be voluntarily dissolved by filing an election to dissolve. The election to dissolve can be made by the vote of the written consent of at least 50 percent of the corporation’s outstanding shares. If no shares have been issued then by the board of directors. In limited circumstance, if no directors were named in the original California Articles of Incorporation and none were elected, a majority of incorporators can elect to dissolve. After this election, the corporation must file a Certificate of Election to Wind Up and Dissolve (Form DISS STK) and a Certificate of Dissolution (Form DISS STK). Only the Certificate of Dissolution is required if the election to dissolve is made by the vote of all of the outstanding shares.
Instead of the above-referenced certificates, a domestic stock corporation may file a California Short Form Certificate of Dissolution (Form DSF STK) if the following are satisfied: 1) The Short Form Certificate of Dissolution is being filed within 12 months from the date the Articles of Incorporation were filed; 2) The corporation has no debts and liabilities (other than tax liability); 3) The tax liability will be satisfied on a taxes paid basis or the tax liability will be assumed; 4) The final tax return has been or will be filed with the Franchise Tax Board; 5) The corporation has not conducted any business; 6) The corporation has not issued shares, and if the corporation has received payments for shares from investors, those payments have been returned to those investors; 7) The majority of the directors (or incorporators, if directors were not named and none have been elected) authorized the dissolution and elected to dissolve the corporation; and 8) The assets have been distributed to the persons entitled thereto or no assets have been acquired. Upon the filing of the Certificate of Dissolution or Short Form Certificate of Dissolution by the California Secretary of State, the corporation will be completely dissolved and its corporate existence will cease.
A California corporation that is in “suspended” status with the CA Sec., pursuant to Revenue and Taxation Code sections 23301, 23301.5 and 23775, cannot be dissolved.
IRS Dissolution Requirements: Corporations are required to file IRS Form 966, Corporate Dissolution or Liquidation. A final tax return should be filed with the IRS. Form 966 should be filed along with the final tax return.
Incorporate in California with the California incorporation experts. Unlike the competition, we are not only a “filing service.” We are an actual full service California law firm. Call now for a free California attorney consultation. There is no commitment and we would be more than happy to answer any questions you have regarding incorporating in California.