Saturday, June 16, 2012

Establishing Your Own Corporation

You want to set up a new business in California and you want it to be a corporation. Establishing a corporation will be no simple task, though. There are forms to fill, concepts to think about, and positions to fill. Below are things to remember when you are looking to incorporate in California.

Name your business

Be sure the name you chose for your corporation is not the same as others in the files of California's Secretary of State. Avoid any similarities with those names as it can bring about copyright infringement lawsuits on your corporation.

The board of directors

The next step is the creation of your corporation's board of directors. California law states that a corporation needs at least three board directors, except when there are only one or two shareholders. The number of directors should be in the Article of Incorporation or the by-laws.

California does not have a minimum age or residency requirement for the people who will comprise your board of directors. You and the others looking to incorporate in California can recruit or appoint someone in New York to be a member of your board.

Filing with the Secretary of State

You can now see California's Secretary of State and file the articles of incorporation (sometimes called a "charter" or a "certificate of incorporation") with that office. Some of the common information in the charter includes the company name, the company's legal address, its incorporators, the purpose of the business, and the names of the board members. There is a fee for the filing, around $100.

The corporation's bylaws and statement of information

In California, incorporation needs the would-be corporation's bylaws. The state does not set any rules for the content. You should just include the rules and procedures you want for your corporation, definition of roles and responsibilities for its offices, the size of the board, and other important details. You do not have to file the bylaws with California's Secretary of State, but you should always keep a copy.

Next, you have to file a Statement of Information with the Secretary of State. This has data similar to the bylaws, but also includes complete address of the corporations' board of directors and its upper management, the name of the Agent for Service of Process (the person who will accept lawsuits in behalf of your corporation), and other important details.

Meetings, stocks and taxes

You must hold an organizational meeting that includes the owners and the directors. Here, you appoint the corporate officers, approve the bylaws, authorize stocks, set the accounting (or fiscal) year, adopt a stock certificate form, designate a bank, and choose a seal.

This is where you issue stock certificates to the owners of the corporation. The board is the one that sets the amount received for each stock, unless otherwise stated in the articles of incorporation.

Finally, you must know what tax and other regulatory obligations your corporation has. This will include requesting an Employer Identification Number (EIN) from the Internal Revenue Service (IRA), and the state of California if you will be paying $100 to an employee or several of them in the quarter.

Once these procedures in the California incorporation are done, open a bank account for the business. Depending on the bank, you might need your EIN, a copy of the articles of incorporation and a resolution that states who the authorized signees are.

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