California is much more than just sunshine and beaches. As one of the largest states in the U.S., it also plays a pivotal role in both domestic and global economies. With a gross state product (GSP) of $3.4 trillion, if California were its own country it would have the fifth largest economy in the entire world. As such a major hub of commerce, it is no wonder why entrepreneurs and business owners are drawn to the Golden State. From San Diego to the San Francisco Bay Area, thousands of businesses provide the spark that keeps this state’s economy running. Whether you are in the entertainment, agricultural, or tech industry, if you are wondering how to set up a corporation in California, you can hardly be blamed–with unbeatable weather and a booming business sector, there are not many better places to set up shop.
Before you get to work on drafting your paperwork to incorporate your business, however, it may be helpful to gain a bit of understanding about what a corporation does. On a very basic level, a corporation is a legal entity that is separate and distinctive from its owners. Corporations can enter contracts, hire employees, own assets, pay taxes, and borrow money, giving them many of the same rights as an individual. There are a number of reasons to consider forming a corporation in California, but one major draw to this structure is that it is relatively easy to generate capital and outside investment by issuing stock.
How to Set Up a Corporation in California: Getting Started
If you have weighed the options available and determined that a corporation is a more logical legal structure than, say, a limited liability company (LLC) or a limited liability partnership (LLP), there are a few steps that you will need to complete. At the outset, you are going to need to select a name for your corporation. Your name cannot be misleading to the public, and it should be completely distinguishable from the other corporations listed in the California Secretary of State’s records. While many states will require that you have the words “incorporated,” “corporation,” or “limited” in your corporate name, California does not have such a requirement.
You can peruse the Secretary of State’s business database to see what is taken or available by sending a request to their office in Sacramento, or by looking online. You can also submit a Name Reservation Request Form that will allow you to reserve your corporate name for up to 60 days.
Filing Your Articles of Incorporation
With your name chosen and reserved, you can move ahead with filing the paperwork necessary to incorporate your business. In California, this is done with a form called Articles of Incorporation – General Stock (Form ARTS-GS). This document must contain your business’s name and physical address, the number of shares you plan to issue, and a broad statement of purpose. You will also need to provide the contact information for your registered agent. This individual will be tasked with receiving all government, tax, and legal correspondence on behalf of your corporation. Your registered agent must be a resident of California, and they will need to complete a Registered Corporate Agent for Service of Process Certificate Form (Form 1505) with the Secretary of State’s office.
When filing your articles of incorporation, you have a couple of options for how to process them. You can draft this document on your own and mail them to the appropriate office in Sacramento, though that can be time-consuming. You can also work with us at Corporation Center. We are a private service that helps busy business owners process their documentation online in a quick and comprehensive manner.
Holding Your First Board Meeting and Drafting Bylaws
Once your articles of incorporation have been filed, this is generally a good time to hold your first corporate board meeting. During this meeting, you can appoint your directors, decide on a meeting cadence, set your fiscal year, and discuss the issuance of stock. This is also a helpful occasion for creating and adopting your corporate bylaws. Though not legally required, your corporate bylaws can provide a helpful roadmap for the day-to-day management of your organization. These rules can be used to establish record-keeping practices, a meeting schedule, as well as management duties.
You will also want to make sure that your corporation is appropriately registered with the Internal Revenue Service (IRS). This will give you your employer identification number (EIN), which will be important for your tax concerns. You will also need to make sure that your business is on record with the California Franchise Tax Board (FTB).
Now that you know how to form a corporation in California, learn more about our services and how we can help you. Take a moment to browse our site navigation–we have online forms for business processing matters in all 50 states. If you have any questions, contact us by email or phone today.