How to Form an S Corporation in California

Introduction

The process of forming your own corporation can be overwhelming, especially if you do not have much experience with corporate law and regulations. There are several things you need to take into account when forming an S-corporation in California, including the specific steps involved and the legal requirements that must be met to form such a company. In this article, we will go over some of the most important aspects of forming an s-corporation in California as well as provide links to helpful resources for further research:

Determine your corporate structure.

You must first determine whether or not an S corporation is right for you. The main advantage of an S corporation is that it allows owners to avoid double taxation, which means that the corporation pays taxes on its income and then shareholders pay tax on their dividends. An S corporation is also a pass-through entity, meaning it isn’t subject to federal income tax like traditional corporations are; instead, all income and gains flow through to shareholders who report them on their personal tax returns. Finally, because most states follow federal law when determining how a business structure will be taxed, you can use an S corp in any state as long as it complies with all state laws (which vary from state to state).

Choose a business name.

The first step to forming an S corporation is to choose a name for your new business entity. Before selecting your company’s name, make sure that it isn’t already in use by checking the availability of the name with the California Secretary of State. Also, keep in mind that your business’s name needs to be unique, short and easy to remember so as not to confuse customers or investors. The words “corporation,” “incorporated,” “company” or any variation thereof should not be used in the naming process because they are already taken by state law. Lastly, since this is an S corporation and not another type of business entity (such as an LLC), it shouldn’t reflect on any specific industry such as accounting or law firms

File articles of incorporation with the California Secretary of State.

You must file articles of incorporation with the California Secretary of State. You can do this either by mailing or faxing a copy of your articles to them, or by filing them online. You will receive a certificate upon receipt of your completed documents. The certificate is then sent back to you by mail in about 10 days (or sooner if you filed online).

Choose a registered agent.

A registered agent is a person or business entity that serves as the corporation’s address in California. The registered agent must be available during regular business hours and have a physical address in California.

Create bylaws.

Once you’ve decided to form your business as an S corporation, you’ll need to set up bylaws. The bylaws are the rules and regulations that govern how your business will be run.

The main reason for creating bylaws is to ensure that everyone involved in the company is treated fairly, no matter what their role is or how long they’ve been there. Without clear rules on everything from voting rights to financial compensation, it’s hard for a small company to feel like it’s operating on an even playing field when people have different levels of power or responsibility.

By setting forth these kinds of guidelines before things go wrong, you can help prevent hurt feelings and frustration from creeping into areas where they don’t belong (such as in salary negotiations). Bylaws should also include descriptions of any committees or boards your company might create in its early stages—that way if those roles change later down the line due to expansion or restructuring needs, everyone knows what’s expected of them at all times!

Hold a board of directors meeting and adopt bylaws.

Each corporation must have a board of directors, which is the governing body of the corporation. The board is elected by shareholders and has authority to make decisions on behalf of the company.

Bylaws are another important document that you will want to adopt early in your S Corporation’s life. They provide a set of rules that govern how your business will be run and how you manage its affairs.

Issue stock.

Once you’ve formed your S corporation with the Secretary of State, it’s time to issue stock. Your new company will be a closely held entity, meaning only active employees can own shares in the company.

You’ll need to determine what share price is fair and reasonable for each type of stock issued by your business. It’s important to think about how much money you want to raise and how many shares should be sold before deciding on a price point. If more than one type of stock is being issued, they should all have different prices—in other words, don’t just charge $1 per share!

Once you’ve decided on an appropriate value per share, it’s time to issue those certificates! You will need to supply them with official state paperwork that gives the recipient permission from both parties: first from yourself (the person who owns this business), then from California authorities (so they know you’re allowed). Remember that these documents are valuable pieces so keep them somewhere safe until further notice! Remember also that once someone owns their own certificate(s) they cannot sell/transfer them unless otherwise stated by law; however if someone dies then their surviving spouse may inherit ownership rights based upon pre-determined conditions specified within legal documents called “Wills.”

Elect officers, hold another board meeting and appoint them.

  • Choose officers. Your board of directors is responsible for electing the corporation’s officers. The board can appoint anyone it wants to be officer, whether or not that person is a shareholder.
  • Appoint the officers. After you have elected your officers, you must hold another meeting of your board and appoint them by action of the directors (this should be recorded in minutes). You’ll need to provide each officer with an executed copy of his or her appointment letter from the company; this document will become part of their official personnel file at the S Corp and will show that they’ve been properly appointed by your board.
  • Choose a treasurer who isn’t an officer: Although there isn’t any law requiring it, most California S Corps choose not to have one person serve as both president/CEO and treasurer; instead they split these roles between two different individuals so they can avoid potential conflicts-of-interest situations down the road

Get an Employer Identification Number from the IRS.

You’ll need an Employer Identification Number (EIN) to open a bank account, file taxes and conduct any other business with the IRS. You can apply for one online (it’s free and takes about a week).

Apply for any other required licenses or permits, including seller’s permit, business license and zoning compliance.

You’ll need to apply for a sellers permit, business license and zoning compliance.

Forming a corporation can be complicated but is a necessary step to take if you want to form an S-corporation in California

Forming a corporation can be complicated, but it’s the necessary first step to take if you want to form an S-corporation in California.

What is an S-corporation?

An S-corporation is a type of corporation that has been granted tax benefits by the IRS as long as certain conditions are met. An S corporation can choose to be taxed as a partnership or C corporation, depending on whether it has more than 100 shareholders and meets other requirements outlined by the IRS.

Why form an S Corporation?

There are several key reasons why forming an S Corporation may be beneficial for your business:

  • Lower Cost – The corporate entity will pay only one set of taxes (the C corp would pay two). This means that there will be no double taxation on profits or losses that pass through from a personal tax return (or 1099) into the LLC/S Corp. It also means there won’t be any additional fees added onto payroll taxes like unemployment insurance contributions in order for employees who own stock shares above $100 worth per year must make those payments directly from their own pocket rather than through wages paid by employer during regular payroll cycles; this saves money overall especially when considering multiple employees working together over time period where amounts could add up quickly.* Mergers & Acquisitions – Corporate law allows shareholders with large stakes in companies they wish to acquire control over because they don’t have majority stakeholder power inside their target company yet still need access rights according these rules when attempting making deals outside influence different board members voting rights (majority control) within certain organizations

Conclusion

While forming an S corporation in California is a bit more complicated than forming a regular corporation, it’s worth the effort. This type of business structure offers many benefits over other forms of incorporation and can help you build your company faster and more efficiently. Remember that if you decide to form an LLC instead—or any other type of business entity—you still need to register with the IRS as well as state and local authorities before filing taxes or starting operations.

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