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How to Form a Corporation in California

Learn how to start a Corporation in California by tackling business names, bylaws, and filing articles of incorporation.
KJ
Written by Katharine Jiang
Updated 7 months ago

Table of Contents

1. What is a Corporation?

2. How do I pick the right Corporation name in California?

3. How do I file an Article of Incorporation in California?

4. What's a registered agent? How do I pick a registered agent in California?

5. What do I need in bylaws in California? 

6. What is an EIN? How do I register for an EIN?

7. What taxes do I have to pay in California?

8. How do I register as an out of state corporation in California?

9. What are the ongoing requirements for being a corporation in California?

1. What is a Corporation?

A corporation is a type of business that is legally separated from the owners of the business and can issue stock based on the value of the company. Corporations are more formal than LLCs and have more flexibility to raise financing from various investor types. Corporations are typically taxed at higher rates than LLCs and have more regulations to follow. 

There are two types of corporations: C-Corporations and S-Corporations.
C-Corporations are the traditional corporations you think of when you hear about a company on the Stock Market. A C-Corporation has shareholders, a board of directors, and corporate officers (CEO, CFO). 

S-Corporations are a type of corporation that traditionally (depending on the state) doesn’t pay corporate income taxes. S-Corporations have strict restrictions on the number of shareholders and don’t allow foreign shareholders. 

C-Corporations aren't the best fit for every business. Tell WizForm about your priorities (raising money, taxes, location) and WizForm will outline the pros and cons of each business type. 

The rest of this article is about forming C-Corporations. 

 

2. How do I pick the right Corporation name in California?

Requirement #1-

  • Pick a name that is distinguishable and available. While the meaning of “distinguishable” varies by state, it typically means a name should be different enough from an existing business name to avoid confusing a consumer. Here’s an example:
    -“Delicious Cookies” and “The Delicious Cookie” are not different enough.
    -“The Most Delicious Cookie” and “Delicious Cookies” are different enough to pass the test. 
  • Available means no one else claimed the business name in the state.

California considers the following things to be "distinguishable" enough to allow you to register:

  • Arrangement of words. A proposed name may be acceptable if the proposed name contains a variation in the sequencing or arrangement of the same words as the existing name. 
    -Systems Analysis And Research Consultants and Systems Research And Analysis -Consultants Inc. are not deceptively similar to each other and do not require consent. 
  • Initials and letters of the alphabet. When a proposed name and an existing name both consist only of initials or letters of the alphabet, the proposed name may be acceptable if the proposed name has removed or added an initial or letter of the alphabet or has added or deleted an “and” or ampersand (“&”). 
    -ABC, Inc., ABCD, Inc., BCD, Inc. and ABC Supply Corp. are not deceptively similar to each other and do not require consent. 
  • The use of a surname
    -E.G. Williams Electric and Williams Electric Company are not deceptively similar to each other and do not require consent. Jim Nomura, Inc. and Nomura Inc. are not deceptively similar to each other and do not require consent. Ralph A. Johnson, Inc. and Ralph Johnson, Inc. are not deceptively similar to each other and do not require consent. 
  • Phonetic spelling. When a proposed name and an existing name sound the same but are spelled differently.
  • Prepositions. Prepositions (“in,” “on,” “of,” “by,” “about,” etc.)
  • Words in a Foreign Language that mean the same thing as English.
  • Acronyms. 
    -R.I.S.E. (Riding Instruction For Special Equestrians) and Rise, Inc. are not deceptively similar to each other and do not require consent. 

California does not consider the things listed below as "distinguishable" enough to allow registration:

  • Use of upper case letters, lower case letters, the use of superscript or subscript letters or numerals or the use of an ampersand in place of “and” or vice versa.
  • Existence or absence of one or more business entity identifiers.
    -Sampson, Incorporated, Sampson Corporation and Sampson Ltd. are deceptively similar to each other. 
  • use of a possessive “s”, or a plural. 
  • use of different or added articles of speech (such as: “a,” “an,” “the”) or a conjunction or disjunction (such as: “and,” “&,” “or”). 
  • addition or omission of distinctive lettering or typeface, punctuation, symbols or spaces. 
    -The following items are considered punctuation: Period . Slash / Comma , Back Slash \ Semicolon ; Hyphen or Dash – Colon : Underline _ Apostrophe ‘ Swung Dash ~ Single Quotation Mark ‘ Parentheses ( ) Double Quotation Mark “ ” Brackets [ ] Question Mark ? Angle Brackets < > Exclamation Mark ! Braces { } 
    (2) The following items are considered symbols: At / each @ Number / pounds # Dollars $ Percent % Caret ^ Ampersand & Asterisk * Plus / positive + Equal = 
    Numerical number and the same number spelled with letters of the alphabet. 
    United 7 Company and United Seven, Inc. are deceptively similar to each other. 

Requirement #2

  • Every corporation has to use a corporate suffix to indicate the company is a corporation. This means the last word in the name must be: “Inc." or "Corp" or "Corporation" or an abbreviation of those. 
  • California allows you to reserve a name prior to registering the company. This prevents someone else from registering the name. WizForm recommends against reserving a name as its generally an unneeded expense for the company. 

Requirement #3

Corporations cannot use a prohibited word. While this list is made for Michigan, the rules apply to most other states. These words are reserved for companies with specific permissions to operate as a doctor, banker, or other profession listed. 

 

WizForm uses machine learning to check if your name is available and distinguishable by state. WizForm is unique compared to other websites in that WizForm checks for distinguishability. 

What is a Fictitious Name? How do I register a Fictitious Name in California?

Fictitious names, also called DBAs/Trade Names/Assumed Names/Alternate Names, are made-up names that you can use to market your business. 

 

Fictitious names are different from the legal name of your business. Fictitious names cannot contain a corporate suffix (LLC, Corporation, etc.) 


 Fictitious names are used for three reasons:

  1. Companies want to market their company in multiple different ways. Imagine Coca-Cola Company vs. Coke. 
  2. There is a large company that owns multiple smaller companies with distinct brands. Imagine Alphabet, Inc. vs. Google. 
  3. A company registered in one state cannot use their original name in a new state because the original name isn't available. They need a fictitious name.
     
Fictitious names are not required for most LLCs and Corporations unless they are a foreign company that can't use their original name in the new state. Fictitious names are required for sole proprietors if they aren't using their personal name.  

To register a fictitious name in California, you need to file a registration document with the county clerk where your business is located. The document must be notarized. You also must file a newspaper notice in a newspaper in the county where your business is located and return the proof of publication to the county clerk. 

  

3. How do I file an Article of Incorporation in California?

Article of Incorporation is the document that every domestic corporation in California has to file to register their company.

The Article of Incorporation includes business name, mailing address, and number of shares authorized. You can file the Article of Incorporation on the California Secretary of State website.

You might be wondering: Why would I use a service like WizForm to do this if I can just do it myself? You could do it by yourself but there are several benefits to using services like WizForm.

  • 1. Protecting your privacy. When you file the Article of Incorporation, all the information on the document is public (your name, your address, email, phone number). Anyone can look it up and use that information to send you mail/email/phone calls. If you use WizForm, we will incorporate on behalf of you and protect your privacy by using our name, address, email, and phone number. 
  • 2. Filling out the form correctly. While most of the sections are self-explanatory, there are some key sections that can be confusing. These include the company's duration, authorized shares, par value, the effective date of the company, and picking the right name. Additionally, you want to be careful that you don't over-disclose on the filing if your business needs to evolve in the future. 
  • 3. Using a Registered Agent. See the section below for more on registered agents and why you should use one.
  • 4. Setting up bylaws. Bylaws are the rules that govern how a business is run. You need to make sure that your bylaws cover situations like how to dissolve the company, transferable interests (if someone dies or gets divorced), rights of stockholders if the company gets acquired, and voting procedures. 

 

4. What's a registered agent? How do I pick a registered agent in California?

A registered agent is a person or company acting as your company’s contact when the government needs to reach you about a legal matter. This person is the person that is “served” a lawsuit. It’s smart to use a registered agent to protect your privacy and to ensure your company is reachable if a legal matter arises. If you appoint yourself as a registered agent and aren’t around when someone tries to serve you a lawsuit, the court can enter a default judgment for the other side (which is expensive). 

 

 There are many registered agent services, but WizForm is unique in that it has a national network of registered agents that only cost $25 a year. Most services will cost you $50-$125 a year. If you register with WizForm, the registered agent fee is part of the overall cost you pay WizForm. 

5. What do I need in bylaws in California? 

Most states require you to have bylaws for your corporation.  These rules range from how profits are distributed to dissolving the company. All corporations need bylaws because the government will control how you run your company without one. 

 You do not have to file bylaws with the state. It's a private document.    

Each state varies in what a business is allowed to put in its bylaws. If you want to write an bylaws yourself (we do not advise this), you should look for these things in the state law:

  • Does the state limit indemnification? 
  • Voting Rights of Shareholders
  • Appraiser and Dissenter Rights
  • Transfer Rights and how divorces/deaths affect the rights of members
  • Profit Distribution
Most companies will give you a generic template that doesn't fit your company's needs. WizForm is unique in that our team has tackled complex documents like mortgages and college financial aid. We understand that you want a document that is legally enforceable but also understandable. WizForm builds a customizable experience that allows you to understand your bylaws, insert custom provisions, and meet state-specific laws. 

6. What is an EIN? How do I register for an EIN?

  • To set up a bank account and get paid by other vendors, you will need an Employer Identification Number (EIN). The IRS provides EINs for free. 
  • You will use your EIN to pay taxes with the federal government. 
     
WizForm can register for an EIN for you. Using advanced technology, WizForm can register you for an EIN in less than a minute.  

7. What taxes do I have to pay in California?

Every business has to pay local, state, and federal taxes. Corporations are double taxed: income is first taxed at the company level and then again at the personal income level when passed to shareholders. .

California specific taxes

  • If you want to pay your California taxes online, you’ll need to call the Franchise Tax Board at 1-800-353-9032 (or 1-916-845-2829 from outside the United States) before you start the online registration process.  
  • If you want to hire employees as your business grows, you’ll need to get a payroll tax account number from the Employment Development Department (EDD). If you fail to verify your email address within 24 hours, you’ll have to start the enrollment process all over again.
  • If you have employees, establish a California withholding tax account with the California Employment Development Department (EDD) by registering here. Be aware that you don’t need to establish an account until you’ve paid over $100 in wages in a calendar quarter. 
  • If you have employees, report all new or rehired employees who work in California to the state’s New Employee Registry within twenty days of their start-of-work date. You can do that via the California Employment Development Department.
  • If your corporation is involved in selling or leasing any goods, products, or tangible property that would usually be subject to sales tax, you’ll need to get a seller’s permit here.
  • California has a personal income tax. Any shareholder in California will need to pay personal state income taxes and federal income taxes on income passed to them.
  • California has a corporate income tax that is applicable to companies that have income in the state. The company will need to pay state corporate income tax and federal corporate income tax.
  • If the company doesn't have any income, it has to pay an annual tax of $800 (called Franchise Tax) in California by the 15th day of the 4th month after you file your registration documents. You can find out more details here. 


  

8. How do I register as an out of state corporation in California?

State governments refer to out of state companies as "foreign." This term includes out of state and out of country. 

States require you to register as a business if you "do business in a state." This term isn't super clear as each court will evaluate a business on a case by case basis. In general, you should register your business if you do any of the following:

  • You have contracts with people or companies in the state.
  • You have employees or offices in the state (this includes the founders)
  • You have bank accounts in the state.
  • You are paying local taxes or sales taxes in the state. 
  • You use wholesalers or affiliates in the state to sell your product.

The key is if you are doing business consistently or in a 1-time transaction. If you are consistently doing business in a state, you need to register there.

 If you don't register, you can get fined by the government, owe back taxes from when you started doing business, and lose the ability to fight lawsuits in court in that particular state. 

To register in California as a foreign corporation, you need to:

  • Obtain a Certificate of Existence from the first state you incorporated in.
  • File a Statement and Designation by Foreign Corporation - Stock. The document must be mailed. 
  • Suppose the original legal name of your business isn’t available in the state. You will need to register a fictitious name. 
  • Need to adhere to all sales tax, unemployment, wage withholding, and new hire requirements that a domestic corporation follows in the state. 
  • Need to adhere to any annual report requirements like a domestic corporation follows in the state. 

WizForm does not currently support foreign registrations but its on our roadmap for the near-term future! 

 
9. What are the ongoing requirements for being a corporation in California?

You are required to file a Statement of Information within 90 days after filing your initial registration. After you file your initial Statement of Information, you are required to file once every two years. 

 

When you subscribe to WizForm, WizForm will file your Statement of Information for you. 
WizForm is not a law firm and does not offer legal advice. The information in this article is based off independent research and should not be construed as legal advice. If you need legal advice, please consult an attorney. 
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