When deciding to form a business in Los Angeles, San Francisco, San Diego, San Jose, Sacramento, Fresno or elsewhere California, you should review and evaluate the most recent state laws and regulations that apply to your specific company and, most importantly, seek the advice of a qualified professional who has experience with California corporations that are similar to yours. You may want to consider information that could help you determine whether forming a corporation or limited liability company (LLC) in California is right for you.
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Business owners who incorporate in California experience the peace of mind derived from the limited liability protection a corporation provides. California corporations can protect your personal assets, since they cannot be used to satisfy debts and liabilities of the corporation. A California corporation's limited liability protection also shields its shareholders from any claims arising from lawsuits.
A California corporation's board of directors and officers enjoy the same limited liability protection as do the corporation's shareholders.
Unless you elect to have a special “pass through” tax status with the Internal Revenue Service (IRS) by filing an IRS Form 2553, your California corporation will enable you to shelter and retain more income since a corporation files tax returns and pays its income taxes (at generally lower tax rates than do individuals) while the individual shareholders report and pay personal income taxes only on monies paid them by the corporation. Although shareholders are required to pay taxes on income from dividends paid by the corporation even though income taxes were previously paid by the corporation (called “double taxation”), a California C corporation can facilitate the accumulation of earnings.
Forming a corporation in California should make it easier to get additional capital than it would be with some of the other types of businesses. You can issue and sell stock or a variety of other financial instruments as evidence of interest in the corporation and ownership in California corporations can be easily transferred through the issuance or transfer of stock.
Employees would normally prefer to work for a corporation rather than a proprietorship or partnership and a California corporation has the advantage of being able to attract, motivate and retain quality employees by offering stock option and bonus plans.
California corporation owners working in the business are employees and are therefore eligible for certain fringe benefits such as group insurance plans, retirement and profit sharing plans, and tax-favored stock option and bonus plans. In addition, the corporation allows owners to reduce self-employment taxes.
Also, a California corporation is a separate legal entity and, in a sense, immortal and perpetual since it does not end with the death of a shareholder owner as do some of the other business types.
If you're a small business owner who has chosen to incorporate in California, you may struggle in deciding which type of incorporation is best. At MaxFilings, we hope to clearly distinguish the advantages and disadvantages of starting an LLC vs. a corporation, whether to classify your business as an S Corp or C Corp, and give you a better idea of which option will provide the best results for your continued financial and operational success.
|Limits personal liability|
|Ownership structure||Unlimited owners||Unlimited shareholders||No more than 100 shareholders (US citizens or resident aliens only)|
|All business income/loss passed through to owners each year|
|Owners pay personal income tax on profits|
|Business must pay corporate income tax|
|Recognized outside of the US|
|Flexible management structure|
|Annual Meeting Requirement|
A California corporation's name cannot be one which is likely to mislead the public or which is the same as, or resembles so closely as to tend to deceive, the name of any other entities' names registered or reserved under the laws of California.
A California corporation with three or more shareholders must have at least three directors, while those corporations with fewer than three shareholders need have only at least as many directors as shareholders. Your company bylaws must state the number of directors that comprise the board of directors, or that the number of directors shall be not less than a stated minimum nor more than a stated maximum (which in no case shall be greater than two times the stated minimum minus one), with the exact number of directors to be fixed, within the limits specified, by approval of the board or the shareholders in the manner provided in the bylaws.
A California corporation shall have a chairman of the board or a president, or both. A secretary, a chief financial officer and such other officers with such titles and duties as shall also be stated in the company bylaws or determined by the board. The president (or if there is no president, the chairman of the board) is the general manager and chief executive officer of the California corporation, unless otherwise provided in the articles or bylaws. Any number of offices may be held by the same person unless the articles or bylaws provide otherwise. Except as otherwise provided by the articles or bylaws, officers shall be chosen by the board and serve at the pleasure of the board.
An annual shareholders' meeting must be held for the election of directors on a date and at a time stated in or fixed in accordance with the bylaws. Special shareholder meetings may be called by the board, the chairperson of the board, the president, the holders of shares entitled to cast not less than 10 percent of the votes at the meeting, or any additional persons as may be provided in the articles or bylaws.
Directors' meetings may be called by the chair of the board, the president, any vice president, the secretary or any two directors. Regular meetings of the board may be held without notice if the time and place of the meetings are fixed by the bylaws or the board. Special meetings of the board shall be held upon four days' notice by mail or 48 hours' notice delivered personally or by telephone, including a voice messaging system or by electronic transmission by the corporation.
California franchises are taxed $800 (minimum) annually. See the California Franchise Tax Board website.
*For complete and current information concerning California corporations, visit the state's official website. The information listed above is not an attempt to present all you need to know when forming a corporation in California but rather to call your attention to some basic information and requirements you may want to know as you submit information to form your corporation or LLC.
MaxFilings is committed to helping business owners just like you. Here are a few reasons why MaxFilings stands out as the resource of choice when forming a California corporation:
Competitive, Transparent Pricing. There's never any obligation to order and there's no charge for saving your information – you only pay your incorporation fees when you're ready to order. View our competitive pricing - it includes all state fees and other charges, so you'll have no surprises later.
Convenience & Ease of Use. MaxFilings helps you get organized in an orderly way and you set the pace – you can save all your incorporation information in one handy spot online and make changes anytime until you're ready to incorporate…or you can order your incorporation online right now!
Secure & Confidential. As a MaxFilings user, you can rest easy knowing that all your information is completely safe. We use industry-recognized security safeguards for storing and processing your orders, ensuring stringent data security for as long as you want to keep it with us.
Partner Perks. As you incorporate, you need to think about growing and promoting your new corporation. MaxFilings' online promotions partner SEO Advantage offers you expert services in PR, web development, search engine marketing, website optimization and graphic design.
Best of all, your satisfaction is 100% guaranteed!
If you're ready to form a California corporation, you can start entering your information now. You're under no obligation, and there is no charge until you actually place your order.
Wondering what happens after you submit your incorporation order to us? Have questions about using MaxFilings to incorporate your business or form an LLC? Here you'll see basic questions about our system that can help make your experience smooth and hassle-free. FAQ About MaxFilings