Why Form a California Corporation With Us?

Corporations are a distinct type of business entity in the United States, recognized as separate legal entities from their owners, who are known as shareholders. These entities can distribute ownership through shares, which may be held privately by a select group or publicly traded on stock exchanges.

Additionally, there are non-stock corporations, which can be established for either non-profit or for-profit purposes. These structures allow the corporation to engage in various activities such as entering contracts, securing loans, hiring employees, and facing lawsuits. Forming a corporation involves compliance with specific tax regulations.

When you form your corporation with us, the process is quick and confidential, guaranteed within 24 hours. Our services include drafting bylaws and shareholder agreements, scanning up to five pieces of mail, providing a business address, conducting a name search, covering the Secretary of State filing fee, and appointing a registered agent.

Corporation Fees & Cost

Why is our mail scanning service important for LLCs and Corporations?

This section outlines the mandatory fees associated with filing your Articles of Incorporation and the annual renewal requirements for your corporation. These fees are set by the state and apply uniformly whether you process filings through our service, another agency, or on your own. Costs for additional services like drafting bylaws and hiring a registered agent are detailed separately.

What do our packages include?

Fee to File Articles of Incorporation: In California, the filing fee for Articles of Incorporation is $100, which is a one-time fee at the formation stage.

Fee to File Bylaws & Shareholder Agreement: There is no state fee for filing bylaws or shareholder agreements as these are internal documents.

Franchise Tax: California corporations must file a Statement of Information annually, with a filing fee of $25, plus $800 minimum Franchise Tax filing fee.

Fee to Amend Articles of Incorporation: To amend your Articles of Incorporation, a filing fee of $30 is required in California.

Fee to Dissolve Corporation: Dissolving a corporation in California requires a $30 filing fee to officially terminate its existence.

Fee to Reinstate Corporation: If a corporation has been dissolved or suspended and seeks reinstatement, the fee is $100.

Fee to Foreign Register Corporation: For a corporation formed outside of California but operating within the state, a $100 registration fee is required for foreign qualification.

While these fees constitute a part of the financial commitment to maintaining a corporation in California, they facilitate compliance with state laws, potentially avoiding more significant legal and financial issues down the line. It’s important for potential and current business owners to budget for these expenses as part of their overall business planning.

Corporation Advantages & Disadvantages

Forming a corporation in California offers a variety of advantages tailored to the diverse needs of businesses and their founders. This structure can help in protecting personal assets, potentially lowering tax liabilities, safeguarding personal information, and elevating the business's professional stature among clients and competitors alike. If you have any uncertainties or need detailed information, we are here to help clarify how these benefits could align with your business goals.

Asset Protection: Corporations provide a clear separation between personal and business assets, which shields personal wealth from business liabilities.

Anonymous Corporation Privacy: While corporations do enhance privacy, they are not completely anonymous; owner information may still be accessible through public records.

Corporation Taxes: Incorporating may result in tax benefits, such as lower federal taxes due to income splitting possibilities and deductible employee benefits.

Being More Professional Than a Sole-Proprietorship: Operating as a corporation can increase credibility, attracting more clients and investment opportunities compared to a sole proprietorship.

While corporations offer significant advantages, they also require more stringent compliance with regulations and potentially higher administrative costs, which could be a drawback for some small business owners.

Asset Protection

Corporations offer excellent asset protection by creating a legal barrier between the business owners' personal assets and the liabilities of the company, often referred to as the "corporate veil." This separation helps protect personal wealth from claims against the business, such as debts or lawsuits. However, this protection is not absolute. In instances of negligence or fraudulent activities by the corporation, courts can "pierce the corporate veil," potentially holding shareholders personally liable for corporate actions. Moreover, maintaining this protection requires strict adherence to corporate formalities and separate financial management to prevent mixing personal and business assets, which could undermine the legal distinction needed for asset protection.

Taxation

Corporations face a unique tax structure both at the federal and state levels, which can be both an advantage and a challenge. Federally, traditional C-corporations are subject to corporate income tax, which is separate from the personal income tax shareholders pay on dividends, leading to a potential issue of double taxation. Alternatively, S-corporations benefit from pass-through taxation, meaning profits are taxed only at the individual level, avoiding double taxation.

In California, corporations are additionally subject to a state corporate tax rate, which adds to the fiscal burden. This complexity in tax obligations requires meticulous planning to manage effectively, but with proper strategy, corporations can find ways to minimize their tax liabilities. This dual-layer of taxation emphasizes the importance of strategic financial planning to leverage potential tax benefits fully.

California Corporation Requirements & Compliance

Forming a corporation in California involves specific requirements and costs that demand careful planning. Initially, the filing fee for the Articles of Incorporation is $100—a reasonable investment for the legal protection and enhanced credibility a corporation provides. Contrary to the paragraph, California corporations must file a Statement of Information biennially, not annually, which can simplify ongoing compliance and potentially reduce administrative expenses compared to states requiring annual reports.

Naming a Corporation, and Searching for Available Names: Select a unique name, check availability via the California Secretary of State’s website to avoid conflicts.

Bylaws & Shareholder Agreement: Essential internal documents that outline the corporation's rules and shareholder rights, not filed with the state but critical for governance.

Annual Report or Franchise Tax Filings: File a Statement of Information biennially and pay an annual minimum franchise tax of $800, regardless of profit levels.

Opening a Bank Account & EIN: Secure an Employer Identification Number (EIN) from the IRS to open a corporate bank account, essential for financial transactions.

Corporate Transparency Act: New corporations must report beneficial ownership information to FinCEN, starting in 2024, to enhance anti-money laundering measures.

These compliance steps ensure that your corporation remains in good standing and operates effectively within the regulatory framework, balancing legal obligations with potential administrative burdens.

Naming/Search

When naming your California corporation, choose a name that is distinctive and not easily confused with existing entities, especially government agencies. It should include corporate identifiers such as "Incorporated," "Corporation," or their abbreviations. California prohibits the use of certain words like "Bank," "Trust," and "Insurance" unless specific permissions are obtained. To ensure the name isn't already taken, perform a thorough search on the California Secretary of State's website. This step is essential to avoid legal complications and ensure your corporate name is compliant and approved for use.

Common vs. Preferred Stock

Common stock represents the ownership stake most investors receive when they invest in a corporation. These shares provide a claim on the corporation’s profits through dividends, but only after all debts and obligations to preferred shareholders are fulfilled. Common shares often come with voting rights, allowing shareholders to influence corporate policies and management decisions. However, the extent of these rights can vary.

Preferred shares, on the other hand, generally do not offer voting rights but come with other benefits. Preferred shareholders receive dividends before common shareholders and have priority during the liquidation of the corporation's assets. Preferred shares may also include call or put rights, enabling the corporation or shareholders to buy back or sell shares at predetermined prices. Additionally, they often have conversion rights, allowing preferred shares to be converted into common shares under certain conditions. Golden shares, which are a special class, may carry unique voting rights that can override other classes in specific decisions.

In summary, while common shares offer potential for higher returns and voting power, preferred shares provide more stable dividends and greater security in the event of liquidation, catering to different investor preferences and risk appetites.

Bylaws

One of the initial steps in forming a corporation is drafting the organization’s bylaws. Bylaws are a set of rules and procedures established by the Board of Directors that guide the operation and management of the corporation.

Unlike the Articles of Incorporation, which legally establish your business within a state, bylaws provide the internal framework that governs corporate processes and responsibilities. While Articles of Incorporation are filed with the state and made public, bylaws are internal documents that do not require filing or incur any fees.

Bylaws should be signed by the members of the Board of Directors. They can be amended as needed, but it’s important to include an amendment process within the bylaws themselves to ensure changes are made systematically. In California, as in other states, having well-defined bylaws helps maintain clarity and order in corporate governance, and they serve as a critical tool for resolving disputes and ensuring compliance with state regulations.

Par Value

Par value is the nominal or face value assigned to a share of stock or a bond by the issuer and remains fixed throughout the security's life. Unlike market value, which fluctuates based on trading activity, par value does not change.

For preferred stock, par value is crucial in calculating dividends, determining call or redemption prices, and assessing liquidation amounts. When preferred stock is issued, the par value typically represents the amount received per share by the issuing company.

For common stock, par value has little practical significance today and often bears no relation to the actual price paid for the stock. Historically, before the advent of no-par statutes, corporations had to assign a par value to their stock due to state laws. To minimize potential liabilities, they often set the par value very low, sometimes as little as 1/100th of a cent. This nominal value formed a binding contract between the corporation and the shareholder, ensuring the company was legally bound to the value specified.

Shareholder Agreement

A stock subscription agreement is a contract between a corporation and its investors regarding the purchase of the corporation's stock. These agreements outline the terms and conditions under which the investor will buy shares, including the number of shares, price per share, and the total investment amount. They also help determine the investor’s suitability and commitment to investing in the corporation.

Unlike bylaws, which govern the internal operations and management of the corporation, stock subscription agreements are specific to the financial transactions between the corporation and its shareholders. These agreements are not legally required but are crucial for maintaining proper corporate governance and record-keeping.

The Board of Directors typically approves and authorizes stock subscription agreements. They ensure transparency and accuracy in tracking the issuance of shares, valuation methodologies, and the total capital raised. These agreements may also include additional provisions such as specified rates of return, non-dilution clauses, non-compete and confidentiality agreements, and terms for buy/sell and drag-along/tag-along rights.

In California, as in other states, having a well-drafted stock subscription agreement helps protect both the corporation and the investor by clearly defining their rights and obligations, thus promoting a healthy investment environment.

Franchise Tax

In California, corporations must file an annual Statement of Information with the Secretary of State, detailing key business information. Additionally, they must pay an annual franchise tax, with a minimum fee of $800, regardless of profit. The franchise tax helps maintain the corporation’s good standing in the state. Failure to file the Statement of Information or pay the franchise tax can result in penalties and the suspension of corporate rights and privileges.

Corporate california Attorney

Strategic planning is crucial in business, especially when stakes are high. Our corporate services extend beyond simple corporation formation in California. We offer comprehensive asset protection, registered agent services, and estate planning, adding significant value beyond basic legal requirements. We pride ourselves on building lasting relationships with our clients, supporting their ongoing compliance and business needs long after formation.

Registered Agent Service: Ensures your corporation has a reliable contact for legal documents and government notices.

Forming an LLC: Simplifies the setup process, ensuring all legal requirements are met efficiently.

Mail Scanning & Virtual Office: Provides a professional business address and efficient mail handling services.

DBAs: Facilitates the registration of Doing Business As (DBA) names, allowing flexibility in branding.

Corporate Compliance: Helps maintain your corporation’s good standing with ongoing regulatory support.