How to Form a California Corporation

Forming a corporation instead of an LLC usually is a matter of the scope of the intended business. Both structures have the advantage of shielding owners from personal liability. Corporations, however, are strongly preferred by outside investors and are recognized outside of the USA.

This article identifies the steps that are taken to form a corporation. States other than California may have slightly different rules or procedures. Some type of legal or business consultation should take place to decide the different variations that exist in forming your corporation.

1. Decide the name. The name cannot be misleading in any way or resemble another so closely as to lead to deception. Name availability can be checked on the Secretary of State website.

2. Decide the structure of your corporation, specifically the owners or shareholders, the directors, and three officers. The officers to be named are President, Secretary, and Treasurer. In California and other states all the positions can be one person.

This structure will be shown, in part, with the Articles of Incorporation filed which can include the directors who would all have to sign and will be shown in the By-Laws which are not filed but are kept with the company records along with the minute book.

3. All corporations in California must have a registered agent which can be an individual or a company. This is an address that is available during normal business hours to accept legal or governmental communication on behalf of your corporation. Company attorneys are frequently used in this role or there are services that can be hired.

4. Prepare your Articles of Incorporation. The forms supplied by California which can be downloaded meet the minimum requirements of the California Corporation Code, or you can create your own, or have an attorney, or a filing service prepare articles for you in a kit.

The basics that must be established in your articles are first your corporate name, your corporate address, your registered agent’s contact information, and how many shares you are authorizing the corporation to issue. Sometimes the beginning Directors are named, and if not, then the by-laws or the first shareholders meeting will accomplish that.

5. Hold your first shareholders/directors meeting. The minutes of this significant meeting should be the first page in your minute book. You must adopt your by-laws setting forth the rules of managing the company, shareholders elect directors if not already established in the Articles, directors then appoint officers (president, secretary, and treasurer), and authority to act on behalf of the corporation to establish bank accounts and such is established.

6. Obtain an EIN number.

7. Within 90 days of filing your corporation you must file a statement of information with the State of California. Other states do the same thing in one form or another. You must provide information about the directors and officers of the corporation.

By law, your corporation is formed when the Secretary of State accepts your articles. However, if there is any wrong information in your articles, and the biggest obstacle is acceptance of your name, the articles can be rejected, and you will have to correct whatever the problem is.

 

This information is not intended to replace or substitute for any professional or legal advice on any of the subjects discussed. It is purely informational.

 


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