Are you looking to start a California corporation? California is a dynamic and diverse state, and a perfect place to start a new business. Here at PRIME, we often steer our client’s toward the LLC business structure, but in some cases, a corporation makes more sense. Starting a corporation in California can feel overwhelming, but we’ve consolidated all the important information into six steps in this article. If you’ve got questions about the right entity structure for your business, or if you want help with any part of setting up your business, reach out to one of our PRIME advisors for a free consultation.
Step 1: Name Your California Corporation
The first step in starting a corporation is to choose a business name. This name must be original and comply with naming requirements of California corporations.
California Corporation Naming Guidelines
- The name must possess a full or abbreviated version of “corporation,” “company,” “incorporated,” or “limited.”
- The name must be different from any other business in California.
- The name can’t possess the words “bank,” “trust,” “trustee,” “credit union,” or other related terms without approval from the Commissioner of Business Oversight.
- The name can’t contain terms that correlate with a government agency. Examples include the FBI, Treasury, State Department, etc.
The California state statute has a California Code of Regulations regarding naming for new entrepreneurs.
Is the Corporation Name Available in California?
In order to name your corporation, the name must be distinguishable from other California business names. The California Secretary of State’s Business Search Portal can help you figure out if your choice of business name is available.
Is the URL Available for Purchase?
For best advertising practice, make sure there is a URL available for your desired business name. Purchasing a web domain immediately is a good way to ensure your name. Good sites for building a website include GoDaddy and Wix.
Step 2: Determine a Registered Agent for your California Corporation
When you register with the Secretary of State, you must determine a California agent for service of process, also known as a registered agent.
A registered agent can be one or more people appointed by a corporation to handle the service of process in addition to government communication and handling documents.
The agent must be 18+, available during business hours and has a California address. If you have questions, set up a free consultation call.
Step 3: Hold an Organizational Meeting for Your California Corporation
Before filing the Articles of Incorporation, the team should hold an organizational meeting to complete tasks regarding:
- Articles of Incorporation
- Share structure
- Incorporator’s Statement
Create and Approve Corporate Bylaws
Bylaws can be considered the constitution of a corporation. These rules come secondary to federal or state law.
When considering your bylaws, make sure to cover topics such as:
- The role of directors and officers
- Records management
- Shareholder meeting dates
Choose a Share Structure and Strategy
Stock determines the unit of ownership one possesses in a corporation. An individual can own 100% of the stock or it can be divided among shareholders.
These shares can be divided into classes, with different privileges that come with them. You can have many classes.
Appoint Initial Directors
Until the first shareholder meeting is held, at least one director will need to be appointed to oversee your California corporation .
The corporate director deals with the adoption, amendment, and repeal of operational bylaws. In addition to the election, supervision, and removal of officers.
Those in charge should hold an organizational meeting, where the board of directors or the initial director(s) will elect the officers.
Create and Execute an Incorporator’s Statement
An Incorporator’s Statement should be written by the incorporator(s) with records of names and addresses of the initial directors. This document can be stored among other corporate records. This document lists the initial directors that will act until the first BOD meeting.
Step 4: File the Articles of Incorporation with the State
To set up the corporation, you must file the California Articles of Incorporation. This document officially creates your business and can be filed by mail or in person with the Secretary of State. This costs $100.
This document covers topics such as:
- The corporation’s name and address
- The agent name and address
- The authorized shares of the corporation
Step 5: Complete and File the California Statement of Information
Fill out and complete the California Corporate Statement of Information form within the first 90 days of registering your California corporation. This is an annual record which must be filed. Instructions are included in the information form. The filing fee is $25.
Step 6: Obtain a California Corporation EIN
California corporations require an EIN, an Employer Identification Number (EIN), or Federal Tax Identification Number (FTIN),to identify their entity. This serves as a company social security number.
EIN’s can be used to open a business bank account, file taxes and hire employees.
EIN’s can be acquired through the IRS (free of charge) online or by mail.
Frequently Asked Questions
How do I name my business?
Make sure to follow the corporation naming guidelines for the State of California.
What are the requirements to become a registered agent?
The registered agent must be 18+, available during business hours and has a California address.