How to Form a Corporation in California (Incorporation Checklist)
Business people often incorporate to protect their personal assets from business liabilities. The liability protection afforded by a corporation to its owners is not, however, available without completion of each of the legal formalities required to correctly form the business entity, and maintaining its structure. This article addresses some of the legal formalities found in the California Corporations Code required to correctly form a corporation in California.
How Do I Form a Corporation in California?
Forming a corporation involves more than merely filing Articles of Incorporation with the Secretary of State. At formation, there must be a meeting of the Shareholders to elect the company’s Directors, followed by a meeting of the Directors to conduct several items of business such as adopting and writing the company’s Bylaws, appointing the officers, authorizing the issuance of stock to the shareholders, and authorizing the Company to open a checking account.
What is Required to Incorporate in California?
When forming a corporation, the new entity must file a Statement by Domestic Stock Corporation with the California Secretary of State identifying the company’s officers and directors, and providing the address of the company’s principal place of business and agent for service of process.
As a new legal entity, the corporation must also obtain a federal employer identification number. The identification number will be required on the corporation’s tax returns, and is usually required by banks in opening the corporate bank accounts.
The identification number can be obtained by filing out a Form SS-4, and mailing it to the IRS office at which the corporate tax returns will be filed, or by telephoning the IRS. In addition the new corporation must obtain a business license and complete the necessary fictitious name filings, if applicable, and other filings with the governmental entities that regulate the new business.
How to Become an “S” Corporation | California Corporations Code
If you have elected Subchapter “S” status for the corporation, be certain to contact your CPA to file the necessary election form with the IRS. The IRS form 2553 for a Subchapter “S” election must be filed within a specified number of days after the date of incorporation or the entity will be considered a “C” corporation, with different tax results.
It is also essential that you deposit into the corporate checking account an amount determined by your CPA to be adequate capitalization to run the new company and which is consistent with the formation documents, as recorded in your Board of Director’s Minutes authorizing the issuance of the stock to the shareholders. Similarly, the Board of Directors and Shareholders must meet at least annually to maintain the corporate formalities.
Get Help Incorporating Your Business in California
If you have questions about incorporation in California, or any other corporate issue, contact Debra Grimaila, Esq. at Orange County Business Lawyer, P.C.
Toll Free: (844) 921-1937