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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

It offers you numerous advantages, including but not limited to:

  • The strongest form of liability protection possible by insulating your personal assets and finances from business debts, obligations, damages, bankruptcy or other liabilities
  • Several options to create, buy, sell or transfer stock, including publicly
  • The ability to issue more than one class of stock
  • The ability to sell stock to investors inside and outside the U.S.
  • The ability to raise more funds by issuing more stock

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).

Start a Business in California Checklist

To help you along the way, use our Starting a Business checklist to keep track of everything you need to do to get your business up and running.

 

How to Form a California Corporation Yourself in 6 Steps

1

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.

We can check California corporation name availability for you

2

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.

3

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.

4

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.

Here’s what is required in your California Articles of Incorporation:

  • The exact name of the corporation
  • The initial street address of the corporation
  • The initial mailing address of the corporation (if different from the street address)
  • Name and address of Agent for Service of Process
  • The class and total number of shares the corporation is authorized to issue — do not leave blank or enter zero (0)
  • Incorporator's name, email and signature
  • Filing date

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.

Let Incfile Handle All the California Corporation Formation Paperwork for You for $0 + the State Fee

What are the fees and requirements to incorporate in California?

State Fee State Filing Time Expedited Filing Time
$5* 8 Weeks 18 Business Days
State Fee $5*
State Filing Time 8 Weeks
Expedited Filing Time 18 Business Days

*includes a $5 certified copy fee

Statement of Information

Frequency

Annually

Due Date

During six-month period ending on last day of anniversary month of incorporation or qualification.

Filing Fee

$25

Important

The initial Statement of Information filing is due within 90 days of the entity formation date.

California Franchise Tax

Frequency

Annually

Filling Fee

$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)

5

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.

6

Write Bylaws

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

C Corporation

When you file to start a corporation, by default, it's a C Corp. This is the choice for large businesses that will trade shares in the stock market.

A California C Corp will offer you several liability protections, but it will also be required to adhere to numerous strict rules and regulations. It will also likely have a substantial amount of administrative overhead and won't enjoy as many tax advantages as other corporation types.

Learn more about C Corporations.

S Corporation

Technically, an S Corporation isn't a business entity the way LLCs and C Corporations are. It's a tax filing status. An LLC or a C Corporation can be an S Corporation. It's just a matter of filing a form with the IRS.

The main reason to file as an S Corp is to save money on self-employment taxes. To get an idea of how much money you might save, use our S Corp Tax Calculator.

If you want your business to be treated as a California S Corp, file the IRS Election by a Small Business Corporation form, also known as Form 2553 or an S Corp Election form.

Consult with your tax advisor or accountant to determine whether this is your best option.

Learn more about S Corporations.

Compare S Corp vs. C Corp to learn the benefits and drawbacks of both and decide which one will best suit your needs.

Professional Corporation

Some states, including California, allow certain occupations to form Professional Corporations and offer professional services. The state’s Moscone-Knox Professional Corporation Act defines these services as:

"…any type of professional services that may be lawfully rendered only pursuant to a license, certification, or registration authorized by the Business and Professions Code, the Chiropractic Act, or the Osteopathic Act…"

Per Title 1, Division 3, Part 4, § 13401.5 of the Moscone-Knox Professional Corporation Act, the professions permitted to form a California Professional Corporation include, but may not be limited to:

  • Registered nurses
  • Chiropractors
  • Dentists
  • Doctors

Check with the CA Secretary of State to confirm whether your business should and can be a Professional Corporation.

Close Corporation

Put simply, a Close Corporation is one that has a limited number of shareholders and isn't publicly traded.

Usually, Close Corporations are exempt from corporate requirements, such as having a board of directors and holding annual meetings. Per the state's Corporations Code Title 1, Division 1, Chapter 1, § 158, a California Close Corporation is a business entity that has no more than 35 shareholders and holds articles containing the statement "this corporation is a close corporation."

This entity is often chosen by family-owned businesses to prevent non-family members from establishing or claiming any ownership of the company.

Foreign Corporation

If your business operates in another state and you want to expand into California — or vice versa — you’ll need to form a Foreign Corporation.

Learn more about California Foreign Corporation Registration.

Nonprofit Corporation

Charitable organizations can incorporate as nonprofit corporations. This means all the profits they generate are donated to the organization supported by the charity, minus administrative costs.

A nonprofit corporation is also exempt from federal and state taxes, allowing more of the profit to benefit the charity.

Note: Everything in this guide applies to for-profit corporations and mostly to C Corps and S Corps. Items listed as requirements for forming a corporation may or may not also apply to nonprofits.

Limited Liability Company

Depending on the kind of business you want to start, or your personal circumstances and goals, a limited liability company (LLC) may be a better option. For example, you may only want to build a small business with just yourself and a few employees, or you may not need the options to buy and sell stock.

A California LLC is usually a better option for a smaller business. It's easier to set up, but it still offers you certain advantages you'd get from a corporation. You can even have your LLC treated as an S Corporation for tax purposes to save you money. Regardless of which direction you decide to go, we can help you with your California business registration.

Learn more about limited liability companies.

Sole Proprietorship or Partnership

These are the simplest types of businesses to set up. That's because there's no real setup to do. If you don't choose to form a separate business entity, by default, you'll have either a sole proprietorship (just you) or a partnership (you and one or more other people).

Neither of these options provide you with any special benefits or liability protections and can leave your personal assets vulnerable. For these reasons, we don't recommend them.

Compare business entity types to decide which one is best for you.

Helpful Resources from the State of California

More Information in This Guide

You’ll find plenty more insight and guidance on the other pages of this guide, including:

California Corporation Names

How to search the state business registry and find the right name. Includes information on naming rules, fictitious names, reserving a corporation name and more.

California Registered Agents

How to appoint, change and search for Agents for Service of Process. Also includes the duties they fulfill and the rules they’re required to follow.

California Incorporation Fees and Requirements

Details the various fees you’ll need to pay and the state and federal requirements you’ll need to meet. Includes details about Employer Identification Numbers (EINs), state and federal business licenses, Statement of Information reports and more.

California Taxes

Covers the various taxes you’ll have to pay to the state and federal governments. Includes details about state taxes, such as sales and franchise, and federal taxes, such as income and self-employment.

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