Making a new corporation is one of the most common reasons for using California business incorporation laws. A small business may prefer to file the documentation needed to incorporate a business directly with the state. There are also many companies that provide business formation services for a fee.

The most important factor in incorporating a business in California is choosing a specific business structure. California law makes some important distinctions between a corporation and a limited liability company (LLC).

Corporate law defines the way in which the following entities interact:

1. Shareholders that collectively invest in California incorporations. Shareholders may hold special privileges such electing a board of directors, proposing resolutions and sharing in the company’s income.

2. Directors that oversee the company’s activities. The activities of the board of directors are typically determined by the company’s bylaws. The board of directors and the shareholders are typically the same group of people in a small business.

3. Employees that provide expertise and perform labor for the company. Employees are also shareholders in many cases.

Action Steps
The best contacts and resources to help you get it done

Select the best structure for your business when you incorporate in California

Your choice of business types can include corporations, full partnerships and limited partnerships. There are many sites that summarize business laws in California and you may also need an attorney to explain these laws to you.

I recommend: Legal Forms provides detailed descriptions of each of the business entities that California allows. California Incorporation has details on each business type specifically for California. It also has links to a variety of resources to assist you in incorporating in California.

Use a company to create an LLC in California

There are many online services that can submit the required forms on your behalf in exchange for a fee. However, you will still need to comply with the disclosure, operating and reporting requirements.

I recommend: Business Nation provides a variety of options for incorporating your business in California. Paralegal Plus offers incorporation services in California and also maintains information on laws, fees and other costs that are specific to California.

Create a California incorporation by yourself

Each state has a department that is responsible for the formation of new businesses. You can complete these forms yourself and submit them directly to the correct government department.

I recommend: The California Business Portal provides a range of expedited and pre- clearance services. The Department of Corporations has a Small Business Advocate that is dedicated to promoting small businesses in California.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  You will need to select a name before you create a California business LLC. Many online services provide a name search function to determine if a particular name has been used before. The required forms will also provide spaces for more than one business name in many cases. This increases the chances that an unused name can be found.

If you are looking to start or expand a business in California or just need help solving a problem specific to this state or region, there's a wide range of resources — both government and private — available to help. While many nationally focused resources offer helpful solutions, some issues are better addressed at the state or local level. Answers to licensing, zoning, sales tax, incorporation, economic development issues and a mountain of other matters often reside at the state level. Ironically, however, finding the right resources closer to home can often be even more difficult, as local solutions often live in many different places. Cover your bases by seeking solutions in these locations:

1. State government agencies, such as the commerce department, economic development office, secretary of state's office or other business-related state agencies.
2. Small business assistance programs offered through local universities and community colleges that are backed by state and federal resources. These include Small Business Development Centers (SBDCs) and SCORE offices.
3. Private, non-profit and special-interest industry and business organizations that provide a range of services, networking opportunities and even funding options for small businesses.
4. State and local offices of federal agency programs, such as the U.S. Small Business Administration (SBA) office in your area.

Action Steps
The best contacts and resources to help you get it done

Access official state programs for starting and growing a business in California

The state government's gateway is the California Business Portal.

I recommend: California Business Portal offers a five-step plan for starting a business in California. You can also search California businesses, find forms and tax information, request technical assistance, review California codes, and more.

Locate answers on wages, hours, overtime, exempt status and other labor issues

The California Division of Labor Standards Enforcement (DLSE) handles wage claims, work complaints and other labor code issues important to small business.

I recommend: The DLSE's detailed Q&A on wage, overtime and related issues can answer many of your questions on this topic. The Department of Industrial Relations (DIR) has answers on Workers' Comp, safety & health, labor law, apprenticeships, mediation services and more.

Find forms and info online for environmental, regulatory and other permit requirements

A program called CalGOLD delivers direct Internet links and contact information to the state, local, regional, and federal permitting authorities you need.

I recommend: Check the CalGold online catalog to find what you need.

Talk sales taxes with the right California state authorities

Need sales tax info? The California State Board of Equalization is where you get it.

I recommend: At the CBOE site you can register for a permit or license, check tax rates and sign up for small business seminars that explain how it all works.

Get free help at the California Small Business Development Centers (SBDC)

Need help to start or grow a business in California? California Small Business Development Centers (SBDCs) provide free statewide counseling, training and assistance programs. California's huge, far-flung and vibrant small business economy commands six distinct SBDC centers, with 30 SBDCs that include 14 focused specifically on international trade development.

I recommend: Locate lists of services and your nearest location: Los Angeles (including Ventura and Santa Barbara counties), Sacramento, Northern California/San Francisco, Santa Ana, Fresno and San Diego (includes international trade). You can also check a master list of California SBDCs with local contact information.

SCORE more free help for your biz

SCORE, 'Counselors to America's small business' is a terrific national organization that provides free mentoring for small business owners throughout California.

I recommend: These are SCORE California offices: Bakersfield - Golden Empire SCORE; Glendale - Los Angeles SCORE; Merced - Yosemite SCORE; Monterey - Monterey Bay SCORE; Oakland - East Bay SCORE; Oxnard - Ventura SCORE; Palmdale - Antelope Valley SCORE; Rancho Cordova - Sacramento SCORE; San Diego - San Diego SCORE; San Francisco - San Francisco SCORE; San Jose - Silicon Valley SCORE; San Luis Obispo - San Luis Obispo SCORE; Santa Ana - Orange Cty SCORE; Santa Barbara - Santa Barbara SCORE; Santa Rosa - North Coast SCORE; Stockton - Stockton SCORE.

Connect to a California small business resource portal

Discover hundreds of local programs offering free and low-cost help for starting and growing your business.

I recommend: The Business Utility Zone Gateway for California can connect you with a wide range of people, tools and resources.

Snag state-level help from the SBA

District, state and regional offices of the U.S. Small Business Administration can put a more focused face on federal programs and resources, and plug you into local training and assistance solutions.

I recommend: Just plug in a Zip Code, select a specific city from the pull-down menu or check your state on the U.S. map in the middle of the SBA home page.

Locate potential angel investors online

The California Investment Network helps connect entrepreneurs with angel investors.

I recommend: You can submit your confidential investment proposal for free.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Many types of businesses require state, city or county licenses and permits. State offices listed above will spell out any specific requirements for your industry.
• •  Small Business Development Centers (SBDCs) are an often-overlooked but terrific place to obtain free or low-cost advice and information, including training seminars and technology resources that are nearby.
• •  Locally-based SBDC consultants can advise you individually on how to write a business plan, market your products and services, find financial resources and other valuable information.
• •  The regional SBA office can plug you into loan and assistance programs, seminars and other initiatives to aid small businesses.
• •  Linking up with a local SCORE counselor is a great way to learn from an experienced individual about state-specific solutions.

The key to making the most of California business incorporation is selecting the best structure for your business. A corporation affects your ability to gain capital, controls the amount of debt you assume and determines your tax obligations. However, these advantages must be balanced against the additional taxes your business will incur.

You may also choose a partnership when you incorporate in California. Unlike a corporation, a partnership is subject only to personal income taxes although business partners may still be held responsible for business debts.

There are several options for forming a company under California corporate law. These include:

1. California incorporation as a profit or non-profit corporation. An S corporation (S-corp) is taxed under Subchapter S of the Internal Revenue Code which generally does not include income taxes.

2. A California limited liability corporation (LLC). This is a hybrid business entity that shares the characteristics of both a corporation and partnership. It pays incomes taxes and is more suitable for a small business with one owner.

3. A California limited partnership. This type of partnership has limited partners in addition to general partners.

Action Steps
The best contacts and resources to help you get it done

Determine the best structure for your business when starting a corporation in California

The most important factors to consider are the personal liability obligations and tax implications. You should also familiarize yourself with the operating requirements and reporting regulations.

I recommend: The Secretary of State summarizes each business structure available in California and also provides the answers to frequently asked questions on each type. Nolo provides an extensive discussion dedicated to selecting a business entity in California.

Find an attorney that specializes in creating an LLC in California

Incorporating in California must comply with the disclosure, operating and reporting requirements. California corporation law specifies these requirements in detail.

I recommend: Oswald & Yap are based in Irvine and provide a summary of the business entities available to clients in Southern California. Alan M. Insul in Encino includes corporate law as one of its practice areas and also provides links to a number of legal resources for new businesses.

Register your California business LLC

You must file the registration forms and pay the associated fees as required by California corporation law in order to form a California business LLC. You may also need to file Articles of Incorporation, depending on the type of corporation you decide to register.

I recommend: IncorporationNation summarizes the differences between a corporation and an LLC. It also provides business resources for small businesses. Incorporating in California provides specific information about creating an LLC in California, including the information required in the Articles of Organization.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  California incorporations must be maintined with annual fees and filings. Corporations are automatically C-corps unless they specifically register as S-corps with the primary difference being the way they are taxed. One person may frequently hold more than one position in these corporations and many if not all shareholders are also directors in a small corporation.

To form any type of business in California, you must comply with various state laws governing incorporation practices. Although California doesn’t have the most favorable tax structure for business owners, the state is home to a large number of corporations and LLCs.

If you are looking to incorporate a business in California, it’s important that you thoroughly explore the various business entity options and their tax obligations. In addition, you should learn how to protect the intellectual property of your business by registering trade names and trademarks. Familiarizing yourself with California business incorporation key terms will help you obtain the knowledge you need.

Action Steps
The best contacts and resources to help you get it done

California S-corporation (S-corp)

An S-corporation is a business form that is legally recognized as an individual entity independent of its owners or shareholders. In California, there are no eligibility guidelines for incorporators and a corporation can be formed by one or more individuals.

I recommend: Find out more about California S-corps at FindLaw.

California C-corporation (C-corp)

A C-corporation is a business entity that provides flexibility in the number and types of shareholders. Many large companies choose this form because of its flexible structure. The major disadvantage of a C-corp is that it is subject to double taxation by the Internal Revenue Service. The California tax rate for C-corps is a little more than 8% of the corporation's net income.

I recommend: Read more about California C-corps at the Law Office of Jonas M. Grant.

California limited liability company (LLC)

A limited liability company is formed by one or more individuals, partnerships, trusts, estates, associations and other business structures. LLC members are provided limited liability protection and are subject to pass-through taxes.

I recommend: Read more about California LLCs at SanDiegoBusinessLawFirm.com.

Pass-through taxes

Business entities subject to pass-through taxes don't pay income taxes and pass profits through the entity's members and shareholders. California LLCs and S-corps are subject to pass-through taxes.

I recommend: Find out more about pass-through taxes at MaxFilings.

Trade name

A trade name is any name used to identify an individual's company. California law states that business trade names must be filed with the county where the primary business is located.

I recommend: Read more about trade names at the California Secretary of State.

Trademark or service mark

A trademark or service mark is any word, name, symbol or object used to identify the unique qualities or product offerings of a company. The difference between a service mark and a trademark is that a service mark identifies the service rather than the actual product.

I recommend: Find out more about trade names for California corporations at Registering A Trademark.