Corporation (Inc.)

CALIFORNIA

Corporate Naming Requirements:
In California, the corporation's legal name does not require a corporate designator unless the corporation's legal name is the name of an individual (i.e. John Doe, Inc). The corporate designators that can be used are "Incorporated," "Corporation," "Company," "Limited," or the abbreviations "Inc.," "Corp.," "Co.," "Ltd." Although corporate designators are typically not required in California, it should be used anyways in order to tell the general public that you are a corporation.

Special Note: If you are forming a professional corporation, you may be required to comply with special naming requirements. As a general rule, if your profession requires a license, you should always check with the licensing board for special naming requirements before incorporating.

Corporate Record Requirements:
California corporations are required to keep their corporate bylaws and meeting minutes at their principal office in the State of California.

State Corporate Taxes:
Below is an overview of the California corporate taxes:

• S-Corporation Tax: A S-corporation must pay a tax in the amount of 1.5% of the net income or $800.00, whichever generates the higher tax. The tax must be estimated and prepaid to the California tax authority in 4 installment payments. The $800.00 minimum tax is waived for a corporation's first tax year. In the first tax year, new corporations are only required to estimate and prepay 1.5% on their net income (no $800.00 minimum).
• C-Corporation Tax: A C-corporation must pay a tax in the amount of 8.84% of the net income or $800.00, whichever generates the higher tax. The tax must be estimated and prepaid to the California tax authority in 4 installment payments. The $800.00 minimum tax is waived for a corporation's first tax year. In the first tax year, new corporations are only required to estimate and prepay 8.84% of their net income (no $800.00 minimum).
• Banks and Financial Corporations: For banks and financial corporations, the tax rate is 10.84% and the tax rate for financial S-corporations is 3.5%. The minimum tax, estimating requirements, and first year exemptions are the same as above.

California's Reporting Requirements:
All corporations are required to file a "Statement of Information" with the Secretary of State in order to disclose the directors' names, officers' names, and name/address of the registered agent. The filing fee is $25.00. After formation, you must file an initial statement within 90 calendar days after the articles are filed. Afterwards, you must file this statement each year during the 5 month period before your articles anniversary date (i.e. If your articles were filed in August, then you must file your statement anytime between March to August of each year).

Special State Level S-Corporation Election:
California recognizes the federal S-corporation election and no extra state level election is required. However, it is a good idea to file your first year tax returns along with any "IRS S-corporation approval letters" as proof of your S-corporation tax structure.

Professional Services:
California allows professional services (i.e. doctors, lawyers, accountants, architects, etc) to form a Professional Corporation. Professional service C-corporations must pay federal income tax based on the federal personal service corporation (PSC) tax rate which is a flat 35% on all income instead of the regular progressive tax rates. The PSC flat tax can be avoided by electing to be a Professional S-corporation instead.

State Director Requirements:
Below is a brief overview of California's director requirements:

• Minimum Number: In California, you must have at least 3 directors. A lower number of directors can be achieved under the following exceptions:

  (a) If there is only 1 owner or if shares have not been issued yet, then you may have 1 or 2 directors.

  (b) If there are only 2 owners, then you may have 2 owners.

• State Residence Requirements: The directors are not required to be California residents.