How to Incorporate a Business in California

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parts

1Reserving Your Corporation’s Name

2Incorporating Your Business

3Fulfilling Other Obligations

Other Sections

Tips and Warnings

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References

Forming a California corporation increases the credibility of your business. It also limits the owner’s legal liability and offers tax advantages. If the proposed business name is available, you can incorporate a business in California by filing articles of incorporation. However, before opening, you must obtain other necessary permits and licenses, as well as a taxpayer ID.

Steps

Part 1

Part 1 of 3:

Reserving Your Corporation’s Name

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   Choose a unique corporate name. California law requires that your corporation’s name not be misleading. Accordingly, you should select an appropriate business name that hasn’t already been taken and that is not too similar to another name in use.

   • If you are a close corporation, then your name must include the word “corporation,” “limited,” “incorporated,” or an abbreviation of each. You are a close corporation if your shares are not traded in public markets.
   • If you are forming a professional corporation, then you should get the name requirements for the profession in which your corporation will be engaged. You should contact the state agency or board that oversees your profession.
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   Submit a name inquiry letter. For free, you can fill out and submit a Name Availability Inquiry Letter. The state will then check whether the name is available. You can complete the letter online at http://bpd.cdn.sos.ca.gov/corp/pdf/naavinquiryform.pdf.

   • You can request that the state check up to three names. List them in the order of preference.
   • Make a copy of the letter for your records and then mail it to the address printed on the letter. You should also include a self-addressed stamped envelope.
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3. 
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   Reserve the name. Once you find a unique name, you can choose to reserve it for 60 days. You will need to complete and submit a form to the Secretary of State’s office. The Name Reservation Request Form is available at http://bpd.cdn.sos.ca.gov/corp/pdf/name-reservation-request-form.pdf.

   • You can submit up to three name choices. The first name that's available will be reserved.
   • Remember to include your fee. Write a check for $10, payable to the Secretary of State.
   • You can mail the completed form to Secretary of State, Name Availability Unit, 1500 11th Street, 3rd Floor, Sacramento, CA 95814. Include a self-addressed envelope.
   • You can also drop it off to the Secretary of State’s Sacramento Office at 1500 11th Street or to the Los Angeles Regional Office at 300 South Spring Street (Room 12513), you must pay an additional handling fee of $10.
4. 
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   Consider getting a trademark or service mark. You can seek federal protection of either your trademark or service mark. A trademark is any phrase, word, symbol, or design that identifies you as the source of a product. A trademark is important because it establishes brand recognition with the public. By obtaining protection, you can exclude others from using the mark and sue to stop them.

   • See Trademark a Name for more information.
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Part 2

Part 2 of 3:

Incorporating Your Business

1. 
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   Appoint directors. Directors act as representatives for shareholders and make major decisions for the corporation. Every California corporation must have at least three directors unless you have fewer than three shareholders. You need to identify the number of directors in your articles of incorporation or in your written bylaws.

   • There are no minimum residency requirements to serve as a director. There also isn’t any minimum age requirement, either.
   • It is common for the owners of the corporation to serve as the board of directors initially. You can recruit new directors later.
   • You should sign an “Incorporator’s Statement” in which you identify your directors and their addresses. Keep this statement with the rest of your corporation’s papers.
2. 
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   Complete an articles of incorporation form. You have the option of drafting your own articles of incorporation or using a form. Forms are available from the Secretary of State here: http://www.sos.ca.gov/business-programs/business-entities/forms. The form you use will depend on the kind of corporation you are forming:

   • Form ARTS-GS can be used to form a general stock corporation.
   • Form ARTS-CL can be used to form a close corporation.
   • Form ARTS-PC can be used to form a professional corporation.
3. 
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   Draft your own articles of incorporation instead. If you don’t want to use a form, then you can draft your own articles. The document must include the following information to be effective:

   • Article I should state the company name. The wording should be exactly as you want it to appear on the records of the California Secretary of State.
   • Article II should state the corporate purpose. If you are forming a close or general stock corporation, then you should use the following: "The purpose of the corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code."
   • Article III must state the designated agent's name and business or home street address in California. If the agent is another company, don't provide an address.
   • Article IV should state the corporate address. Do not use a P.O. Box address.
   • Article V should identify the total number of shares the corporation will be authorized to issue if you are issuing only one class. If you are issuing more than one class, then you need to provide information about the rights, privileges, preferences, and restrictions of each class.
   • Article VI should include the number of shareholders the corporation is authorized to have. Include this information only if you are a close corporation.
   • You should include the signatures of each incorporator at the bottom of the document.
4. 
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   Submit your articles of incorporation. Make a copy of your articles for your own records and then mail them certified mail, return receipt requested to the Secretary of State, Business Entities, P.O. Box 944260, Sacramento, CA 94244-2600. Enclose a check or money order made out to the Secretary of State for $100.

   • You can also hand deliver the articles to the Sacramento Office at 1500 11th Street. If you hand deliver, then you must pay a separate $15 processing fee.
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Part 3

Part 3 of 3:

Fulfilling Other Obligations

1. 
   1
   Create a corporate records book. You will keep this book at your principal office and use it to hold all of your important documents. For example, you will need to keep the following in your book:

   • minutes of shareholder and director meetings
   • stock certificates
   • stock certificate stubs
2. 
   2
   Draft your bylaws. The bylaws are the rules and procedures that will govern your corporation and they are required. You don’t have to file them with the state, but you must keep them at your principal place of business. The bylaws will cover a variety of information, including the following:

   • size of your board of directors
   • location of your corporate offices
   • how directors are elected
   • when and how board and shareholder meetings are held
   • the process for calling a meeting
   • how the board of directors functions
3. 
   3
   Call your organizational meeting. Although you have filed your articles of incorporation, you can’t throw open the doors yet. Instead, the corporation’s owners or directors must call an initial organizational meeting. Generally, you will do the following:

   • appoint directors (if not already named in the articles of incorporation)
   • appoint any corporate officers (who run the business day-to-day)
   • adopt bylaws
   • issue shares of stock
   • adopt a stock certificate form
   • choose a bank
   • other business
4. 
   4
   Request a federal Employer Identification Number (FEIN). You need an FEIN so that you can open a bank account and pay your federal taxes. Think of it as the Social Security Number for your corporation. You can apply for your FEIN at the IRS website here: https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online.
5. 
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   Obtain necessary licenses and permits. You can’t start your business in California unless you have required permits and licenses. The permits/licenses will depend on your location and your business. You should visit the Cal-Gold website at http://www.calgold.ca.gov/ to find out what you will need.

   • At the website, you should select your city or county and then enter your business type.
   • A list of licenses and permits will show after you enter your information. Contact information is also provided so that you can reach the relevant office and ask about the permit or license.
6. 
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   Submit a Statement of Information. You have 90 days to submit your first report to the Secretary of State. There is a simple form that you can fill out, which is available at: http://bpd.cdn.sos.ca.gov/corp/pdf/so/corp_so550.pdf.

   • You must pay $25 as a filing fee when you submit your statement.
7. 
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   Choose whether to become an S corporation. You can avoid double taxation if you elect to become an S corporation. Generally, corporations pay taxes twice—once as a corporation and then secondly to the shareholders. As an S corp, the profits and losses pass through to the shareholders. To elect to become an S corporation, all shareholders must sign Form 2553, available here: https://www.irs.gov/pub/irs-pdf/f2553.pdf. You can qualify as an S corp if you meet the following requirements:

   • Have 100 or fewer shareholders.
   • Have only one class of stock.
   • Not have any shareholders who are partnerships, corporations, or non-resident aliens.
8. 
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   Contact a business lawyer with questions. This article explains how to form certain corporations in California. However, the state has other corporate forms (such as domestic nonprofit corporations) you might want to form. If you have questions about incorporating in California, then you should schedule an appointment with a business lawyer.

   • You can find a lawyer in California by using a lawyer referral service. Call toll-free 866-442-2529 if in California.
   • If you are outside the state, then call 415-538-2250.
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Warnings

• Don't order signs, stationery and other items with the proposed company name until it has been approved and filed with the California Secretary of State.
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