California Corporation Requirements
California corporation requirements are the essential stipulations you must comply with to form and maintain a corporation in California.4 min read
2. California Corporation Formation Costs
3. Steps in Forming a California Corporation
4. Corporate Bylaws
5. California Corporation: Post-Incorporation Formalities
California corporation requirements are the essential stipulations you must comply with to form and maintain a corporation in California. The essential requirements of a California Corporation include the following:
- Filing Articles of Incorporation.
- Paying a state filing fee of $100.
- Assigning a statutory agent having a street address in the state of California.
- Paying an $800 minimum annual franchise tax.
One or more individuals can create a California corporation by filing the formation documents with the California Secretary of State. You can use a California corporation for financial transactions, ownership distribution, public offerings, and several other business purposes.
California Articles of Incorporation
The formation document of a California corporation is called the Articles of Incorporation. It's a short and simple document which should include the following information:
- Name of the corporation: You must choose a unique name for your corporation that is not being used by another business.
- Initial address of the corporation: This must be a complete physical street address with the zip code; a post office box number or a mail service address is not allowed.
- Name and street address of the registered agent: A registered agent is also known as a statutory agent, resident agent, corporate agent, or agent for service of process. You can assign an adult resident individual or a corporation as your registered agent.
- Share capital details: You must assign at least one share of stock to the corporation. You can have different classes of stock.
- Purpose statement: This can be a generic statement on why the corporation is being created.
- Name and signature of the incorporator: The person who is incorporating the company must list his name and sign the Articles of Incorporation.
California Corporation Formation Costs
- The filing fee for the Articles of Incorporation is $100.
- You must pay an additional $15 if you are personally submitting the articles.
- The articles of incorporation must be filed with the California Secretary of State.
- You may expedite the processing of your formation document by paying an additional fee of $75 for two to three weeks' expedition services and $575 for one to two days' expedition services.
- Domestic and foreign corporations in California must pay a franchise tax for doing business in the state. The franchise tax is levied at 8.84 percent on net income. However, in the case of S corporations, the franchise tax is only 1.5 percent of net income.
Steps in Forming a California Corporation
- Choose a name for your corporation. It must be clearly distinguishable from the names of existing businesses in the state. Also, make sure that the name is not misleading in any manner.
- File Articles of Incorporation with the California Secretary of State.
- Assign a registered agent for accepting service of process and other formal communication on behalf of the company. This must be done before filing the Articles of Incorporation, and the agent's name and address must be included in the articles.
- The average time taken for processing Articles of Incorporation is two months. You can, however, expedite the process by paying additional fees.
- Prepare corporate bylaws or the internal governing document for the administration of your company. You need not submit this document with any government agency.
- File the initial statement of information within 90 days of incorporation. You must pay a filing fee of $20 and a disclosure fee of $5 for this document.
Corporate bylaws should include the following information:
- Names of initial shareholders, along with the class of stock allotted to them
- Provisions for appointment of board of directors and their rights and responsibilities
- Provisions for appointment of corporate officers
- Ownership percentages of shareholders
- Rights and duties of shareholders, directors, and officers of the company
- Procedure for allocating profits and losses
- Voting rights of members
- Management structure of the company
- Procedure for amending the existing bylaws
- Provisions for preventing and resolving conflict of interest
- Provisions for conducting annual general meeting of shareholders
California Corporation: Post-Incorporation Formalities
Annual Statement: After filing the initial statement of information within 90 days of incorporation, all domestic corporations must file an annual statement with the secretary of state by the end of the month in which the Articles of Incorporation were filed. The cost of filing this document is $25. Foreign corporations must also file an annual statement, along with a fee of $25.
Franchise Tax: All corporations incorporated or doing business in California must pay income tax to the state.
Other Formalities: Employer identification number, California sales tax, seller's permit, county real estate property taxes, workers' compensation, employee benefits, and business licenses and permits are some other formalities you must comply with.
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