Starting a Corporation in California is Easy
Forming a corporation in California is a simple process that is achieved by filing the Articles of Incorporation with the Secretary of State. In the guide below, we will show you step-by-step how to incorporate in California.
Step 1: Create a Name For Your California Corporation
When naming your corporation, you will need to:
- Follow California Name Requirements
- Complete a Name Search on California’s SunBiz Website
- Consider Securing a Domain Name (URL)
To learn more, read our How to Name a Business in California guide.
You will need to choose a name that complies with California Secretary of State naming guidelines:
- Your name must contain the word “corporation,” “company,” “incorporated,” “limited” or an abbreviation of one of these terms.
- Your name must be distinguishable from any existing business in your state. You can read more about what makes a name distinguishable on the California Secretary of State’s website.
- Your name cannot use the words “bank,” “trust,” “trustee,” “credit union,” or related words without approval from the Commissioner of Business Oversight.
- Your name cannot include words that could confuse your corporation with a government agency (FBI, Treasury, State Department, etc.).
You can also read the California state statute about corporation naming guidelines for more information.
Name Search With the California Secretary of State
You will need to check name availability by searching the business name database on the California Secretary of State's website.
This tool is also useful if you decide to register a fictitious business name or DBA (Doing Business As) for your company. For detailed information about setting up a DBA for your California corporation, check out our How to File a DBA in California guide.
If you have a name in mind but you aren’t ready to officially form your corporation, you can reserve your name. Your business name can be reserved for 60 days by filing a Name Reservation Request with the California Secretary of State.
To file the California Name Reservation Request form, you can submit it by mail or in-person. There is a $10 fee to file the form.
Secure Domain Name
We recommend checking to see if your business name is available as a web domain (URL). Even if you don't plan to make a business website today, you may want to buy the web address in order to prevent others from acquiring it. It’s free to search.
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Once you reserve a domain name for your corporation, it’s time to set up a business phone service to improve customer support and boost credibility. Our first pick is Nextiva because of its quick setup and variety of helpful features. Try Nextiva.
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Step 2: Choose a California Registered Agent
When you file your California Articles of Incorporation, you will be asked to give the name of your California service of process agent.
Who Can Be a Registered Agent? Your registered agent can be an individual, business entity, or professional registered agent service. A registered agent must:
- be 18 years or older
- have a physical address in the state where business activity is conducted
- always be available (in person) during normal business hours
ZenBusiness offers one year of free registered agent services with their corporation formation package ($39 + State Fees).
Step 3: Choose Your Corporation’s Initial Directors
You must appoint at least one director who, among other things, will oversee your California corporation until the first shareholder meeting.
The directors of a corporation are in charge of the adoption, amendment, and repeal of the operational bylaws as well as the supervision, election, and removal of officers.
Later you will prepare an “Incorporator Statement” with complete names and addresses of each director and keep it in your corporate records book.
Step 4: File Your California Articles of Incorporation
Now that you have chosen a registered agent and at least one director, it’s time to make your corporation official by filing the California Articles of Incorporation form with the Secretary of State.
This document will disclose some basics of your business for the public record, including:
- Corporate name and principal address
- Corporate service of process agent name and street address
- Number of authorized shares the corporation is allowed to issue
- Incorporator name and address
Filing Fee: $100
Submit the completed Articles of Incorporation form, along with the filing fee, using one of three options:
Secretary of State
Business Entities Filings Unit
P.O. Box 944260
Sacramento, CA 94244-2260
1500 11th Street
Sacramento, CA 95814
Step 5: Get an EIN
The Employer Identification Number (EIN), or Federal Tax Identification Number, is used to identify a business entity. It is essentially a social security number for the company.
Why do I need an EIN? An EIN is required for the following:
- To open a business bank account for the company
- For Federal and State tax purposes
- To hire employees for the company
To learn more about EINs, read our What is an EIN guide.
California Corporation Operating Procedures and Housekeeping
Set Up a Corporate Records Book
Think of this as the hard-copy record book where all critical corporate documents are kept, like your California Articles of Incorporation, bylaws, meeting minutes, stock certificate ledger, stock transfer documents, etc.
You should keep the corporate records book at your principal location. Corporate records book kits can be purchased online, or you can use a large generic binder to store your records.
Prepare Bylaws for Your California Corporation
Bylaws are the rules that determine how your organization will be governed and run.
You can think about the bylaws as a constitution for your corporation. It makes the rules and priorities clear for everyone involved.
In your bylaws, be sure to include:
- How the corporation will be governed – the role of directors and officers
- How meetings are held, voting procedures, electing officers or directors
- How records will be kept and managed
- How disputes will be handled
- How bylaws will be added/amended in the future
NOTE: A corporation’s bylaws will supplement any rules set forth by the federal government or the state.
Ready to get started? Check out these bylaws templates which you can customize to suit the needs of your incorporated business.
Conduct Your First Board of Directors Meeting
An organizational meeting is the first official meeting of your corporation.
These are some of the things that are discussed in a typical organizational meeting:
- Taking attendance to show you have a quorum (minimum number needed)
- Appointing temporary officers, chairmen, secretary, etc.
- Adoption of the bylaws
- Adoption of conflict of interest policy
Don’t forget to record “minutes” of the meeting and have it signed by all attending directors. Here are some corporate minutes templates to help you get the ball rolling.
Protect Your Assets and Stay Compliant
In order to protect your assets and stay compliant after you start your California corporation, you will need to:
- Open a Business Bank Account
- Establish and Build Your Business Credit Score
- Accounting For Your Corporation
- Research Business License Requirements
Open a Bank Account For Your California Corporation
There are two critical reasons to open a unique corporate bank account.
The first is that separating your personal assets from your business assets adds another layer of protection in the event that your business is sued.
The second is that syncing a single account with business accounting software will make managing your finances much easier.
Read our Best Banks for Startups and Entrepreneurs review to find the best bank for your business.
Establish and Build Your Business Credit Score
Building business credit involves a number of factors, including establishing your business’s fundability, getting listed with the most important business credit agencies, and establishing credit lines while keeping them in good standing to build your score.
A good business credit score can help with many things, including credit cards that are issued in your business’s name instead of depending on your personal credit score, better interest rates on loans, higher lines of credit, and more.
All of these factors help protect your personal assets by making your business the entity responsible for the liability instead of yourself.
Recommended: Get started building your credit by learning How to Check Your Business Credit Score.
Accounting For Your Corporation
It's important to get your books in order, even if you haven't officially opened for business. A well-managed accounting system will help you:
- Track your business finances, including bills, expenses, and income.
- Simplify and file your annual taxes.
You can maintain your accounting in two ways:
- Use a DIY accounting software. This can come with an increased risk of errors especially when starting a new business.
- Hire an accounting service. They can provide comprehensive advice to help optimize your bookkeeping and taxes as well as additional services such as payroll etc.
Recommended: For most small businesses, we recommend using a reputable accounting service. Schedule a free tax consultation for your business now to avoid costly errors in the future.
Get Insurance for Your California Corporation
The next step is to protect your corporation by getting business insurance. Depending on the type of corporation you're operating, your insurance requirements and needs may vary.
So, what is business insurance exactly? Business insurance protects your corporation's assets from losses that can happen naturally while doing business, such as property damage or lawsuits.
To learn more about the exact type of business insurance your corporation will need, visit our When to Get Insurance for Your New Business guide.
Research Business License Requirements
To operate your California corporation, you must comply with federal, state, and local government regulations. The details of business licenses and permits vary from state to state, so make sure to research carefully and plan accordingly.
Find out how to obtain necessary licenses and permits for your business or have a professional business licensing service do it for you:
- Federal: Use the U.S. Small Business Administration (SBA) guide.
- State: Use the California Department of Tax and Fee Administration's website.
- Local: Contact your local county clerk and ask about local licenses and permits.
Recommended: Hiring a professional service will help simplify the incorporation process for you. Check out our review of the best online incorporation services!
What is an S Corporation?
An S corporation (S corp) is an incorporated business that is taxed as a pass-through entity. This means that S corps do not pay federal taxes on their business income. Instead, the business profits "pass-through" to the owners of the S corp, who are also known as shareholders. Then, the shareholders pay income tax and report their share of the profits in the form of salaries on their individual tax returns, which are then taxed.
In order to elect an S corporation status for tax purposes, corporations will need to file form 2553 Election by a Small Business Corporation. The form must be signed by all shareholders and must be filed within two months and 15 days after the start of the initial tax year.
To learn more, read our What is an S corporation guide.