How to Incorporate in California

Incorporating means starting a corporation. If you want to form an LLC, please see "How to Form an LLC in California".

Is your corporation for-profit or not-for-profit? If you are starting a nonprofit, please see "How to Start a Non-Profit Organization in California".

Corporations are formed under and regulated by state law. California offers general stock, close, and professional corporations. General stock is the most common. Close corporations and professional corporations have special incorporation requirements.

C-Corp and S-Corp refer to taxation with the IRS, not to legal structures. Your corporation is taxed as a C-Corp unless you file an election to be taxed as an S-Corp (explained below).

The legal name of your corporation may not conflict with any other registered name. Check availability of your desired name by conducting a name search.

Name Search:

California Online Business Search

Name Reservation:

Optional

Suffix:

• General stock corporation: not required
• Close corporations: "corporation", "incorporated" or "limited" or an abbreviation of one of such words (CCC §202.a)
• Professional corporations: The proposed name must meet the name–style requirements of the law governing the profession for which the professional corporation is engaged. For more information, please contact the California state board or agency that controls your profession.

Identify the corporation’s California registered agent. This individual or company receives service of process (notice of lawsuit) and other legal service for the corporation.

File articles of incorporation to create your corporation.

Within 90 days of incorporation, file your initial report.

Submit to:

California Secretary of State
http://www.sos.ca.gov/

Form:

SI-200: Statement of Information for Domestic Business Corporations

Filing Method:

Mail, in-person, or online

Fee:

$25

Due:

You must file an initial report within 90 days of incorporation.

Turnaround:

~1 business day online. See current processing times.

Penalties:

$250

Notes:

• We recommend filing online.
• Every publicly traded corporation also must file a Corporate Disclosure Statement (Form SI-PT) annually, within 150 days after the end of its fiscal year.
• Original signatures are not required.

Your corporation must keep correct and complete books and records.

Each corporation shall keep adequate and correct books and records of account and shall keep minutes of the proceedings of its shareholders, board and committees of the board and shall keep at its principal executive office, or at the office of its transfer agent or registrar, a record of its shareholders, giving the names and addresses of all shareholders and the number and class of shares held by each.
CCC §1500

Your filed articles of incorporation are the first document for your corporate records. Your corporation will generate many other official records such as bylaws, meeting minutes, and your EIN.

Office supplies intended for a corporation will help you stay organized and save time. Optionally, get a corporate record book, seal, and document templates.

Draft bylaws (potentially using a template) which is the governing document for the corporation. The bylaws shall set forth (unless such provision is contained in the articles, in which case it may only be changed by an amendment of the articles) the number of directors of the corporation (CCC §212(a)). The bylaws may contain any provision, not in conflict with law or the articles for the management of the business and for the conduct of the affairs of the corporation (CCC §212(b)). You will review and ratify the bylaws at your first board of directors meeting.

The initial directors serve on the board until the annual meeting of shareholders (when directors are elected to the board). If the initial directors are not named in the articles of incorporation, they are appointed by the incorporator. The incorporator documents and signs this action for the corporate records.

Hold the first meeting of the board of directors. "After incorporation the initial directors shall hold an organizational meeting, at the call of a majority of the directors, to complete the organization of the corporation by appointing officers, adopting bylaws, ..., and carrying on any other business brought before the meeting." (AC §10A-2-2.05). Keep minutes of this meeting.

The following state laws apply unless overridden by the organizational documents, where permissible.

The rules for specifying the number of directors are strange in California - generally a minimum of three directors are required (CCC §212(a)).

The owners may be issued stock certificates to serve as proof of ownership in the corporation. Remember to hold the first annual meeting of the shareholders (the owners of the corporation) according to bylaws and keep minutes of this meeting.

The following state laws apply unless overridden by the organizational documents, where permissible.

Your corporation must obtain an EIN regardless of whether it will hire employees.

Submit to:

Internal Revenue Service
http://www.irs.gov/

Form:

IRS Form SS-4

Guidance:

IRS Pub 1635: Understanding Your EIN

Filing Method:

Mail, phone, fax, or apply online with the IRS

Fee:

$0

Turnaround:

Immediately online

Notes:

The IRS website is only available during certain hours. Print your EIN before closing your session.

You will need to apply for a California Employer Identification Number if you will have employees.

Submit to:

State of California - Employment Development Department
http://www.edd.ca.gov/

Filing method:

Online

Fee:

$0

To apply for a seller's permit (if your corporation collects sales tax on items sold), use tax account, and other permits and licenses:

Submit to:

California State Board of Equalization
http://www.boe.ca.gov

Filing method:

Online at eReg

Fee:

$0

California corporations are subject to franchise and income taxes. This includes $800 minimum franchise tax. You do not need to register with the Franchise Tax Board, but you may need to start paying taxes.

Guidance:

FTB Pub 1060: Guide for Corporations Starting Business in California

More Information:

State of California - Franchise Tax Board
https://www.ftb.ca.gov

By default, your corporation is taxed as a C-Corporation. Some corporations, especially smaller ones, benefit from electing S-Corp tax treatment:

• C-Corps suffer from double taxation: the corporation pays taxes on profits then members pay taxes on their distributions. If profits exceed $250,000 per owner, you provide employee benefits, or you will re-invest most of your profit in the business, you may benefit from the low tax rates on retained earnings under C-Corp treatment.
• S-Corp treatment avoids double-taxation. It is generally the best choice for small businesses. To accomplish this, file Form 2553: S-Corp Election with the IRS.

To run your business legally, you must obtain applicable licenses and permits. The easiest way to navigate the wide range of federal, state, and local requirements is to search by your business type and locality using the Small Business Administration Business License & Permit look-up tool.

You must file federal and state tax returns. You must also file:

• California corporations file a California annual report.
• California corporations must pay $800 minimum franchise tax annually.