Why Incorporate in California?
The California Governor's Office of Business and Economic Development offers several business incentives in the form of bonds, loans, tax credits and exemptions. Your corporation may be able to take advantage of these incentives, provided it meets the qualifying criteria.
For example, the California Competes Tax Credit is an income tax credit available to businesses that want to locate in California or stay and grow in California. Businesses of any industry, size or location compete for over $180 million available in tax credits by applying in one of the three application periods each year. Applicants will be analyzed based on different factors of evaluation, including the number of full-time jobs being created, amount being invested and strategic importance to the state or region.
For most entrepreneurs looking to start a larger business, creating a California corporation may be the best choice. As a corporation, your business is able to buy and trade stock, and when it comes to excess profits, corporations offer more flexibility than an LLC. A corporation is allowed to pass income and losses to its shareholders, who report taxes on an individual tax return at ordinary levels.
Is an LLC Better Than a Corporation?
It all depends on your goals. For smaller businesses, limited liability companies are usually a better option. An LLC is easier to set up, and you receive many of the same benefits as a corporation, but with less regulation.
Learn more about forming a California LLC so you can decide which business entity is right for you.
Benefits of Forming a California C Corp
Benefits of Forming a California S Corp
It offers several advantages similar to those provided by a C Corp, including but not limited to:
- Options for creating, transferring and selling stock, though not as many as a C Corp (for example, an S Corp is only permitted to sell one class of stock)
- The capacity for up to 100 shareholders
- Simpler rules than those applicable to C Corporations
- Easy transfer of ownership simply by selling your stock
- The possibility of saving money by allowing you to pay less self-employment tax
In this guide, you’ll find information on naming your corporation, getting a Registered Agent, the fees you’ll need to pay, business taxes and much more. We also cover what you'll need to register your corporation and how you'll interact with the CA Secretary of State (SOS).
How to Form a California Corporation Yourself in 6 Steps
Choose a Unique Business Name and Complete a State Business Search
Every California business must have a unique name that hasn't already been claimed by another business in the state. If you’re having trouble coming up with a name, try using our Business Name Generator to gather ideas. You'll need to follow a few naming rules, which you can read about in detail on the California Corporation Names page.
Once you’ve chosen a name, you’ll need to make sure it’s available in California. To learn whether another company in the state is using your desired business name, use our tool to do a California entity search.
You can also carry out a business name search on the CA Secretary of State website.
Provide an Official Address for your Corporation
Every California corporation must have a designated address. That could be your home address (if you’re running the company from your residence), a building where your office is located or any physical address of your preference. The address can be outside the State of California and can be a P.O. Box.
You may also be able to use a virtual mailbox for your business address. Incfile can provide you with a California virtual mailbox where we'll receive your mail and scan it for your online review. This can be especially convenient if you run a home-based business and don't want your home address published as part of your business public record.
Assign an Agent for Service of Process
Most states require business entities to have a Registered Agent. In California, it’s called an Agent for Service of Process, but the purpose is the same. We’ll use these terms interchangeably.
A business entity’s agent receives official correspondence and is responsible for filing reports with the Secretary of State. Every California LLC is required to have an Agent for Service of Process. You'll appoint an Agent for Service of Process when you file your Articles of Organization.
You can fill this position, assign another manager in your business or use a Registered Agent service. If your California Registered Agent is a person, they must have a physical street address in California and must be present during business hours to receive important documents on behalf of your company.
You'll appoint your Registered Agent when you file your Articles of Incorporation in California and officially form your corporation.
All of Incfile’s business formation packages include Registered Agent service. It’s free for the first year and just $119 per year after that. You can also access a digital dashboard to view any document we've received on your behalf.
File Your Articles of Incorporation with the CA Secretary of State
Once you've gathered all the information for your corporation, you’ll need to file a form with the Secretary of State to officially create your business.
Your Articles of Incorporation can be filed online via the Secretary of State website. You can also mail a paper form to the Office of the Secretary of State, or Incfile can file it on your behalf. The California corporation filing fee is $100, and an additional $5 is charged for a certified copy of your document.
File by Mail:
Secretary of State
Business Entities Filings Unit
P.O. Box 944260
Sacramento, CA 94244-2600
File in Person:
Secretary of State
Business Entities Filings Unit
1500 11th Street, 3rd Floor
You only need to file your Articles of Incorporation once, but you'll also need to file a Statement of Information with the CA Secretary of State within 90 days after filing your Articles of Incorporation and every year thereafter. The CA Secretary of State has provided filing tips to help walk you through the process. Also, Incfile can remind you about this every year, or we can do it for you if you have us handle the formation paperwork.
Important: In addition to the filing of your Articles of Incorporation, most corporations must pay a minimum CA franchise tax of $800 each year.
What are the fees and requirements to incorporate in California?
Statement of Information
During six-month period ending on last day of anniversary month of incorporation or qualification.
The initial Statement of Information filing is due within 90 days of the entity formation date.
California Franchise Tax
$800 (minimum) The California Franchise Tax Board requires that all corporations registered in the State of California pay a franchise tax. For new corporations, the minimum franchise tax is $800 per year. However, Franchise Tax is waived the 1st year for corporations but not LLCs.
New corporations that incorporate in California are exempt from the 1st year minimum tax, however the corporate owners are still responsible for paying the applicable franchise tax on any net income earned during the 1st year. Starting in the second year corporations are subject to the annual $800 minimum franchise tax rule.
(We do not assist in the filing of the Franchise Tax Report)
Get an Employer Identification Number (EIN) from the Internal Revenue Service
You'll need an EIN to identify your business to the IRS. You use this number when filing and paying taxes or when submitting payroll information and payments for your employees and for opening a business bank account. You can obtain one directly from the IRS, or Incfile can get one for you as part of the California corporation formation process.
A set of rules that govern how a corporation will be run, bylaws detail how many directors the corporation will have, whether the board of directors will have annual meetings and what the voting requirements are, among other things.
Some states require companies to create bylaws. But in California, you're not legally required to have bylaws unless the Articles of Incorporation don't specify the number of directors in the corporation. You're also not required to file bylaws with the CA Secretary of State, but you must keep a copy at the corporation's principal address.
Regardless of whether bylaws are legally required, it’s a good idea to write them to protect your business from any future changes and events.
California Corporation Types
Check with the CA Secretary of State to confirm whether your business should and can be a Professional Corporation.