C Corporation California: Everything You Need to Know
A C corporation California requires you to fill out an articles of incorporation document and submit it to the secretary of state office.3 min read
2. Corporate Guidelines
3. California Regulations
A C corporation California requires you to fill out an articles of incorporation document and submit it to the secretary of state office.
With that, California charges an incorporation fee. Corporations chartered in California exist as C corps. Further, there are similar attributes to S and C corps in the following areas:
- Personal liability
The primary differences between an S and C corps is that an S corps is a tax structure, while C corps exist as a legal entity. Both S and C corps provide limited liability protections for owners cannot be held liable for company debts and liabilities. S and C corp owners can also sell corporate shares. C and S corps can also raise funds through the selling of stock.
C and S corps may provide employee benefits that are tax free and deductible. Such benefits could include:
- Medical plans
- Life insurance
- Education plans
- Retire plans
When it comes to ownership guidelines, a C corp may be taxed as a distinct entity that’s separate from the owners. Shareholders then report corporate income they receive to the IRS. On the other hand, an S corp will be taxed as a partnership through a method called pass-through taxation. Pass-through taxation allows profits and losses to flow from the business to shareholders so they can file their personal taxes.
To turn your C corp into an S corp, you need to send Form 2553 and submit it to the IRS. Further, you should register for S corp election with 45 days of corporate registration to get your S corp status as soon as possible, but you may also file for S corp election at any period.
Your C corp must meet certain parameters before it can be turned into an S corp:
- The C corp cannot be a foreign corporation
- Your business can only have one class of stock (no tiered stocks permitted)
- The C corp must have no more than 100 shareholders
- C corps cannot be owned by other entities, such as estates or trusts
You may also revert an S corp back into a C corp through the filing of an official request to the IRS. However, the C corp should maintain the Dec. 31 fiscal year, which is a requirement for S corps, and the business cannot convert back to an S corp for a five-year minimum.
Every state has personnel mandates when it comes to incorporating. For California, you must adhere to the following rules:
- Age Requirements: No age mandates exist for directors
- Director Numbers: Businesses must have a three directors at minimum, unless the shares have yet to be distributed. In such an instance, the number may be one or two owners. If a single shareholder exists, you also have one director. If the corporation retains two owners, you may have two to three directors
- Residency: Directors do not have to reside in California
Further, you need to state who your business directors are in the by-laws or your articles of incorporation. Additionally, you must name a registered agent, which is a business or person who receives official documents on behalf of your business. Such documents may include:
- Process Server
Also, the registered agent must operate during normal operating hours, have their name in the articles of incorporation, and have an address located in California.
- Note: Your corporations cannot be a registered agent.
You should note the following qualities in an articles of incorporation document:
- Share numbers that will be dispensed
- Whether there are multiple stock classes
- Address and name of corporate office
California mandates that you submit added paperwork with the articles of incorporation, including an initial statement with the California Secretary of State. The initial statement should be due within 90 days when you register the articles of incorporation, and another annually on the day the corporation was created. Failure to submit the report may jeopardize your company.
California corporations must submit Form SI-200, and foreign corporations must turn in Form SI-350. Both forms should be filed online, or you may mail or hand it in directly. You must pay a filing fee of $25.
To find more information on C corporation California, submit your legal inquiry to our UpCounsel marketplace. UpCounsel’s lawyers will guide you through the registration corporate filing process in California, including all of the regulations you need to be aware of. In addition, they will give you added help on maintaining your corporation, including the fees and forms you need to file.