This is how to form a corporation in California

California the innovation capital of the nation has the highest rate of startup companies in the United States. They also hold the highest percentage of the best one year survival rate of new businesses.

Why is California popular for startups?

California being the innovation and entrepreneurial state of the USA the state government gives many incentives to new business owners and entrepreneurs. New and small businesses contribute a lot to employment and the economy of California. The golden state is also working really hard to diversify entrepreneurship, as from 2018 $20 million have been allocated annually to women-, minority- and veteran-owned companies. Today, approximately 40% of businesses are owned by minority groups and 38% by women. This state is really popular for startups as they help and support new businesses, entrepreneurs and new business owners.

How to start a corporation in California

Starting a corporation in California is simple and easy. Below we list the steps on how to start a California corporation.

Step 1: Create a name for the corporation

There are a few requirements one would need to follow when creating a name for a corporation. Firstly there are legal requirements that need to be followed. The corporation name has to contain any of the following words or abbreviations for - “corporation”, “company”, “incorporated” or “limited”. The name must be distinguishable from any other business or corporation in the state of California. The name may not contain any words that might confuse the public with government entities. The name may also not contain any wording like “bank” or “trust” without special permission.

One would also have to do a name search with the California Secretary of State to see if the corporation name is available as well as a domain name search to see if the domain name is available.

Step 2: Choose a California registered agent

When registering the Californian corporation one will be required to nominate and list the corporation's California service of process agent. Business owners might decide to be their own registered agent or to appoint a third party. TRUiC gives a great guide on how to choose a registered agent for a company as well as the pros and cons of a third-party registered agent on their website.

Step 3: Choose the corporation's initial directors

Appoint at least one initial director for the corporation. Later on a shareholders meeting will be held where an incorporator statement will be completed with all the names and addresses of all the directors. A corporation's directors are responsible for the amendments, adoptions and repeals of bylaws of the corporation. They are also responsible for the supervision, election and removal of officers.

Step 4: File the California Articles of Incorporation

Now the California Articles of Corporation form can be filed with the Secretary of State. The form will contain information like the corporate name and address, the corporation's service of process agent name and address, the number of authorised shares the corporation may issue and the incorporator's name and address.

Filing fees are $100 and documentation can be mailed, delivered in person or be submitted online with the California Secretary of State.

Why choose a corporation

There are two types of business structures, informal business structures and formal business structures. Informal business are businesses like sole proprietorships and partnerships. Formal business structures are businesses like LLCs and Corporations. Below we give some information on these types of business structures as well as when and how a corporation might be a good option when forming a business.

Informal business structures

Informal business structures like partnerships and sole proprietorships are not registered entities and in most states no filing needs to be done for them. They don't offer business owners any form of protection as there is no separation between the entity and the business owner. The business owner is personally liable for the business legally and financially. Should a partnership or sole proprietorship be sued, the business owner/s personal assets are in danger and exposed. An informal business structure business is perfect for low risk, low income companies who do not foresee or want to grow in numbers and profitability. The lower the risk the better for the owner/s

Formal business structures

Formal business structures like LLCs and corporations are legally registered at the Secretary of State and are seen as separate entities from their owners. Both of these business types offer limited liability and protection to the business owners or shareholders.

The reason people opt for corporations is that there are certain tax benefits and investor opportunities that LLCs do not offer. Corporations attract venture capitalists and investors making it easier to have startup capital. In California especially there are many investors that are willing to invest in new corporations.

About Boris Dzhingarov

Boris Dzhingarov graduated UNWE with a major in marketing. He is the CEO of ESBO ltd brand mentioning agency. He writes for several online sites such as Tech.co, Semrush.com, Tweakyourbiz.com, Socialnomics.net. Boris is the founder of MonetaryLibrary.com and cryptoext.com.
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