There will be various steps involved in the process of starting a corporation in the United States, and depending on the state, fees and documents may vary. For anyone starting a corporation in California you will need to file Articles of Incorporation with the Secretary of State. This article will provide a step-by-step overview of how to start a corporation in California.
What is a Corporation?
Corporations are legal business entities that are separate from the owner(s), each owner will have shares in the company, and a single owner will have 100% of the shares. The corporation is run by a board of directors and will have certain bylaws to adhere to. It is best to form a corporation when a business earns a higher profit than the simpler LLC (Limited Liability Company) structure.
How to Start a Corporation in California
1. Naming Your Corporation
Choosing a name for your corporation is an important step as it will determine the ‘face’ of the business and attract the right target market. There are three steps to follow in this process, first, it needs to adhere to guidelines according to the California Secretary of State, these include the following:
The following abbreviations need to be included in the name: ‘corporation’, ‘company’, ‘limited’, or ‘incorporated’.
The name needs to be easily identifiable in the industry and must not mislead the public.
- Prohibited Words
Avoid the inclusion of words that can potentially cause confusion with a government agency like the FBI or State Department. Names that include words like ‘bank’, ‘trustee’, or ‘credit union’ need approval from the Commissioner of Business Oversight.
The second step to naming your corporation is to do a relevant name search on the California Secretary of State website, which will indicate name availability. You can also reserve your business name for 60 days if you need more time to form your corporation. This can be done by submitting a Name Reservation Request with the Secretary of State, which is $10.
The third step is to search domain name (URL) availability. This can be secured before a website is created to ensure that another business does not use it.
2. Choosing a Registered Agent
All corporations will need a registered agent before they form their business. A registered agent, or service of process agent, is either a professional or business entity that acts on behalf of the business to receive and send legal documents and notifications, including tax returns, annual reports, and impending lawsuits against the business or its owner.
3. Choosing the Initial Director
The director of a corporation is responsible for all the major operational affairs of the business. The initial director will oversee the corporation in the beginning of formation before the first shareholder meeting. Once the corporation is formed the ‘Incorporator Statement’ will provide all the names and details of the various directors.
4. Articles of Incorporation
The final step is to file Articles of Incorporation in order to officially form your corporation, as mentioned, these will be filed with the Secretary of State. The information on the Articles of Incorporation will include the following:
- Name of the corporation and address.
- Name of registered agent and address.
- Name of incorporator and address.
- The amount of shares that can be issued by the corporation.
Filing Methods and Fees
Articles of Incorporation need to be sent to the Secretary of State, which is done by mail, in-person, or online via the California Secretary of State website.
Filing fees are charged at $100.
While there are other details to consider when forming a corporation, the necessary steps on how to start a corporation in California are provided above. Visit TRUiC’s website for more information about what to include in the Articles of Incorporation as well as what steps to take to ensure compliance and safeguard personal and business assets.