Fri 22 Jan 2016 | By:

Why You Should Incorporate in California: 5 Solid Reasons

Why Incorporate a Business

Starting a business in California is a time-consuming process, but it’s definitely a legal procedure that will protect your business immensely. If you want to safeguard everything that you have, it’s best that you start looking into the requirements of incorporating in California.

In this article, I’m going to talk about incorporation and the reasons why you should incorporate your California startup. To help you even more, I’ll also introduce you to the top 3 resources for incorporating a business in California.

If you’re ready, let’s start with the 5 solid reasons why incorporating is essential!

Quick Note: If you decide to incorporate in California and want professionals to handle all legal paperwork, look into IncFile (for $49) or LegalZoom (for $149). Both are excellent services and have started over 50,000 businesses like yours.

1) Protection Of Personal Assets

Incorporating your business makes it a separate entity, independent from you as the business owner – it is automatically subjected to its own rights and transactions. In other words, the owner is not associated with the business entity in any way.

This is the best thing about incorporating, it creates a wall between the business and the business owner. If future problems arise, for instance, a customer wants to sue or a creditor wants to seek action, your personal savings and assets will not be at risk.

As long as you continue to establish that you and your business are separate entities (i.e. following corporate formalities, creating separate bank accounts), you’ll be safe no matter what!


2) Establishes The Concept Of Perpetual Existence

If you’re not the sole owner of your California startup, and there are other founders and owners, you definitely need to incorporate the company.

There have been many instances where the misunderstandings between founders/owners have lead to the total closure of a business. However, if your business is incorporated, you’ll be able to issue stocks so no issues on equity would arise if misunderstandings occur.

Situations like the death of one owner, a shareholder withdraws his/her shares, the transfer or selling of stocks, would greatly affect the business’s operations and even its continuation. So if you don’t want this to happen, you need to follow certain measures to ensure the continuation of your business and the only thing that can help you is if you incorporate your business.


3) Take Advantage of Tax Deductions and Benefits

Being able to take advantage of tax deductions and benefits may be one of the greatest benefits of incorporating your California business. When you incorporate, you’ll have tax deductions on operational costs. Examples of operational costs include production costs, employee benefits and salary, marketing and advertising costs and a lot more.

Corporate tax in California are also much, much lower when you compare it with individual tax rates. The IRS offers many tax benefits to incorporated businesses and this is definitely one thing that can help you save money.


4) Looking For Funding Is Easier

No one wants to work with or invest in a startup that is not legitimate and is not officially recognized by the state of California to operate. If you leave your business unincorporated, it will be difficult for you to raise funds or gain capital, because investors will never risk their money if there’s no entity.

If you want to make the process of looking for financing easier, create an entity by incorporating your business. In this way, you’ll be able to gain the trust and confidence of future investors.


5) Builds Business Credibility

Customers are very meticulous when it comes to dealing with businesses, they need some sort of assurance that you’re legitimate and official. This is one of the goals of incorporation, to help you build your business credibility and reputation and improve your overall operations.

Having an LLC, Inc., Co. after you business name will give you that added boost of legitimacy, which in turn can increase your sales and enable you to develop a solid following of loyal customers.

These are just a few examples of the benefits you can get when you incorporate, if you want to know more, you can talk to your attorney. Rather than encountering problems in the future, you can incorporate now and run your business smoothly.


3 Resources for Incorporating a Business in California

Startup Tools and ResourcesEverything basically starts with you, and if you want to make the incorporation process easier, you have to do your part – research and study the process.

If you want to start an LLC or Corporation, there are numerous resources that you can choose from such as guides and tutorials to guide you through the process.

However, if you don’t have the luxury of time or you simply don’t feel like you can do it yourself, you can always use the help of online incorporation providers.

I’m sure that you’ve heard about LegalZoom, but it’s not the only incorporation service that provides quality services out there. Here are 3 other options that you might want to try – they’re as affordable and efficient as LegalZoom

1) IncFile: $49

IncFile ReviewIncFile is one of the most sought-after online incorporation service. It was founded in 2004 and since then, it has assisted over 50,000 business owners worldwide. Aside from its quality services, IncFile is also the most affordable at $49.

You can read the review for more info!

2) CorpNet: $79

CorpNet ReviewCorpNet is another excellent online incorporation service that has awesome services,which include a 24-hour document preparation and processing, Registered Agent Service, free business consultations, free trademark search and free business name search. It’s basic plan is worth $79, the best value for your money.

Read the review to find out more!

3) BizFilings: $99

BizFilings ReviewAlthough a bit pricey compared to other services, BizFilings has proven its place in the incorporation industry. BizFilings has practical features which will help you incorporate your business in a snap. For $99, you’ll be able to take advantage of every feature in the basic plan.

Incorporate with BizFilings, read our review for complete information.

Some features are available in some online incorporation services that are not in others. For instance, IncFile has a free, one year Registered Agent Service that CorpNet doesn’t have. At the end of the day, you should look into the online incorporation service that fits your needs best.


Wrapping Up and Incorporating a Business in Arkansas

Wrapping Up and Starting a BusinessAfter reading this article, I hope that you’ve cast your doubts and uncertainties aside and got rid of your indecisiveness, because incorporation is an essential process if you want to run your California small business legally.

From legal protection to possible tax benefits, incorporating in California should be a decision that you have to make before you launch your business. Before doing so, you have to answer this question, how will you go about with the process? Should you use an online incorporation service or not? The decision is all up to you! Good luck!

About Ryan James

Half hardworking hermit, half avid adventurer, Ryan founded Startup Savant to simplify entrepreneurship and pay it forward by donating a portion of all revenue to support children's education via