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How To Incorporate In California

What is Incorporation:

Incorporation is a registration as per the requirements of the company law in respective countries which is recognized legally as a separate existing entity in the eyes of law. Incorporation signifies that the business enterprises is not sole proprietorship or partnership and is a separate legal existence or entity.


What are the legal benefits of Incorporation:

1. Protection of personal assets sole proprietors or partners are personally and jointly responsible for all business liabilities

A Corporation is a separate and distinct legal entity. This signifies that a corporation can open a bank account, own property and do business all under its own name. The main advantage of a corporation is that its owners, known as stockholders or shareholders, are not personally liable for the debts and liability of the corporation.

2. Transferable ownership

3. Retirement funds

4. Taxation benefits

5. Raising funds from sale of stock

6. Durability/life

7. Credit rating

Steps involved in Incorporatin:

1. Finding a name

2. Purpose or objects

3. Principal place of business

4. Number and type of shares

5. Registration fees to state

6. Corporate bylaw

Incorporation in California:

In the discussion carried above, we have understood the basis for going for incorporation.

The objective of this article is to under the procedures and formalities of incorporation in California. There is a lot of difference between filing of articles of incorporation and incorporating. The procedure in California is similar to incorporation processes of other states, but not identical.

Incorporating in California takes approximately one week if done by expedited processing. With normal processing, it takes about one month.

The first step to incorporate is selecting the name for the company. If the intended name is available, the name can be reserved with the California Secretary of State for 60 days. Incorporating protects the name from being used by another corporation in California. The name cannot infringe on a trademark or service mark.

Since there are hundreds of thousands of corporations in California, many names are not available. Therefore, the first step is to check if the corporate name is available.

The legal concept of incorporation is recognized all over the world. In the United States, Corporations are identified by the term incorporated added after the business name such as California Instruments, Incorporated, or by putting the word corporation in the name of the company, as in Netscape Communications Corporation. In Germany, Austria and Switzerland, the GmbH (limited liability business association) as well as the AG (stock market traded business association) are the most common comparable concepts. In the United Kingdom, the titles Ltd ( abbreviation for limited company) or plc (abbreviation for public limited company) are used for corporations. In France, Spain, Portugal, Poland, Romania and South America the title S.A. is used for corporations. Norway used AS for stock corporations and Sweden uses AB, Italy uses Srl (limited liability company) and SpA (stock Corporation). The Netherlands uses NV and Singapore uses Pte Ltd meaning private limited which is the equivalent of a U.S. incorporated entity. In India Ltd is used to denote public limited company and Pvt Ltd is used to denote private limited company.

California Articles of Incorporation:

To incorporate, Articles of Incorporation must be filed with the California Secretary of State. While filing Articles beings the existence of the Corporation, it does not provide any structure or framework to the entity. The corporation must be completed with Bylaws, the appointment of the Board of Directors, the issuance of stock, and other steps. There is a wide gap between filing Articles of Incorporation and incorporating in California.

Corporate Bylaws commonly include legal provisions, rules regarding voting and calling meetings and other operational issues.

To complete the process of incorporating, directors hold the first meeting of the Board of Directors to elect officers, authorize issuance of stock, adopt the company bylaws and other matters such as deciding about the location of corporate office and banks. Minutes of the meeting signed by the secretary of the corporation are to be prepared to fulfill the above formality.

After articles of incorporation, first meeting of directors, and stock issuance are completed, the company has been formally incorporated. The California Corporations Code, courts and Internal Revenue Service require observance of formalities for the directors and shareholders to have limited liability.

A Federal Tax Identification Number for the company can be obtained from IRS for taxation purpose and for opening a corporate bank account.

If stock is issued in exchange for assets contributed to the corporation, a list of contributed assets should be completed and maintained with the corporate records to document the transfer. Before stock is issued, a permit must be obtained from the California Department of Corporations. The Company is also required to file annual Domestic Stock Statement providing information to the Secretary of State of California regarding the companys principal place of business, names and address of the corporate officers and directors.

Business Licensing for a Corporation

Many cities and counties require a license to do business within the city. If a business intends to operate within the incorporated area of a city, the city government may require a business permit. The California Agency responsible for administration and enforcement of California corporate, business and personal income taxes is the Franchise Tax Board.

If the Corporation will be selling products in California, it must obtain a sellers permit from the State Board of Equalization. Also the corporation must pay California sales tax for products it sells.

Registered Agent

In California, there is no requirement for a resident director to incorporate. Foreign nationals can act as directors of California Companies. However, a California company is required to have a resident agent in California for acceptance of service of process.

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