How to Form a C Corporation in California
Introduction
Congratulations! You’ve decided to form a C corporation in California. Before you dive in, though, it’s important to make sure that this is the right move for you. We’ll walk through the steps of forming a C corporation and explain why it might be a good fit for your company.
1. Determine if a C corporation is the right entity for you.
A C corporation is a for-profit business entity. A C corporation is formed by filing articles of incorporation with the California Secretary of State. A C corporation has many advantages, including:
- Limited liability protection for its shareholders and owners
- Ability to issue stock shares to raise capital or sell shares in the company to investors
- Pass-through taxation as an S corporation does not apply in California
2. Choose a name for your C corporation.
For your corporation to be registered, you must choose the name. Names available are limited and must be unique. This means that you cannot choose a name already in use by another corporation (except for an authorized reserved name). The secretary of state’s office checks names during the registration process. If a name is too similar or not available, then it will reject your application for registration and issue an error message explaining what needs to be corrected on your form.
3. Draft your articles of incorporation.
- Draft your articles of incorporation. The most important document in a corporation is the articles of incorporation. It must be filed with the state, and it contains all of the information necessary for people to know who you are and what your purpose is. To draft your articles of incorporation, follow these steps:
- Contact the Secretary of State’s office and request Form 100 to complete as well as Form 101, which is filled out after filing with the Secretary of State’s office. You can find both forms online here: [link].
- Fill out Form 100 according to what was described above in Step 2 (or if you want more guidance on how to write this document yourself). You can find it here: [link].
- Once these documents are drafted, file them with the California Secretary Of State by mailing or faxing them along with payment for filing fees.
4. File with the California Secretary of State.
After you’ve filed the articles of incorporation with the California Secretary of State, you can get started with your business. You’ll need to file an annual report every year to keep your C corporation active. To do this, mail in a copy of your articles of incorporation and a check for the filing fee. If you’re filing in person at their offices, bring along all those same documents as well as a check for that same amount.
If you’re thinking about opening up a C corporation but want more information on how to form one in California, contact us today!
5. Get an employer identification number (EIN).
You can apply for an EIN online at IRS.gov. You’ll need to sign up for a MyTaxes account as part of the application process. It’s free, and it only takes a few minutes to complete.
Once you have your EIN number, be sure to report it on all tax forms where required.
6. Create bylaws and corporate minutes.
After incorporation, you need to adopt bylaws for your corporation. Bylaws are a set of rules governing the day-to-day operations of a California corporation. They can be adopted at the first shareholders’ meeting after incorporation. The bylaws may be amended at any time by the shareholders with or without board approval.
The articles of incorporation usually establish how many directors will serve on the board (the minimum is one director) and how long they will serve (one year is typical unless otherwise specified).
7. Hold a shareholders’ meeting to approve bylaws and appoint officers and directors.
A shareholders’ meeting is a gathering of all the shareholders to discuss company business, adopt bylaws and elect officers. You need one for two reasons:
- To approve the bylaws that govern how your company is run. Your board of directors can’t adopt them—only you, as a group of shareholders, can do that. You’ll want to make sure that what’s in your bylaws reflects how you want the business run. If you’re setting up an LLC (which has its own set of rules), this step may not apply to you; check with your attorney if you’re unsure.
- To appoint directors and officers—the people who will manage the day-to-day running of the company on behalf of all shareholders’ interests (including yours!). Although there are no legal requirements regarding where these positions fall within an organization’s hierarchy, they typically include at least one director and one officer per 100 shares owned by each shareholder (or fraction thereof). In California, these titles are commonly referred to as president/CEO/chairman/etc., secretary/vice president/treasurer/etc., but anything goes here as long as everyone knows who does what job!
8. Issue stock certificates to shareholders in exchange for their capital contributions, if applicable.
After you’ve formed your corporation and received approval from the California Secretary of State, you should issue stock certificates to shareholders in exchange for their capital contributions, if applicable. Stock certificates are used to represent ownership of a corporation and must be signed by the corporation’s president and secretary. They must also include:
- The name of the corporation
- The date issued
- Number of shares issued and par amount per share
Make sure you follow all the correct steps when filing to become a C corporation in California
You’ll need to follow all of the correct steps when filing to become a C corporation in California. In addition, you should make sure that you do everything correctly, in the right order and always do it properly.
Conclusion
If you have read the above article and are still not sure if a C corporation is right for your business, then you may want to consider forming an LLC instead. This article explains how to form an LLC in California, which can be useful for entrepreneurs who don’t want to incur taxes on their personal income but still want to limit their liability exposure. It’s important that before choosing either of these forms of business ownership, though, that you make sure they meet all relevant federal and state requirements
