3 Things You Should Know when Incorporating a Business in California
Oct 04, 2019 08:22
Whether you are a California resident ready to start a business or someone seeking to open an LLC in California to create an international presence, know that there are a lot of state level quirks that affect the structure and operations of the business. This is why you can’t assume that the rules for one state will apply to your California startup. Here are 3 things you should know when incorporating a business in California.
Your Business Name
You probably know that your business name should be unique. In the state of California, the business name must be unique in that state. You can verify this through the Secretary of State's website. If you pay a modest fee, you can reserve the name of your choice for several weeks while you get all the paperwork together to formally register your business with the state. This gives you time to determine whether you want to operate as an LLC, sole proprietor or another type of business.
The Role of Registered Agents
All California LLCs require a California registered agent. This person can receive documents and official correspondence on your behalf. The registered agent could be a person or a specialized service that acts as a registered agent on behalf of many other businesses.
You must appoint a registered agent when you start the business. You do have the option of replacing the registered agent at a later time. Whether you switch from one person to another, replace service providers, or replace a person with a business that can handle calls and visits at any time is your decision. The state of California requires the registered agent to reside in California if it is a person, or they must have a formal business address in the state open during normal business hours. This means that a registered agent who moves or a service that shuts down must be replaced.
California requires resident agents and the director’s names to be disclosed. However, the stockholder names do not have to be disclosed when you file a corporation. This allows stockholders to maintain their privacy and prevent people from seeking them out when they want to sue someone. The registered agent will accept on your behalf any service of process or court papers if your business is sued.
When you start your business, you’ll have to get your tax paperwork in order. For example, you’ll need an Employer Identification Number or EIN to hire someone and collect the necessary payroll taxes. This is aside from state license and certificates that may be required. The EIN should be arranged even if you don’t have employees, since it is required by most banks to open a business bank account.
All corporations in California except banks and financial firms must pay an annual franchise tax of nearly 9 percent of their net income for the prior year, or the minimum franchise tax of several hundred dollars, whichever is greater. One benefit to incorporating in California is that they let you file your articles of incorporation before year end but without having to file a tax return for that short year, such as when you file the articles of corporation mid-December.
California is one of the best markets for small businesses. It also offers a number of provisions that make it ideal for setting up your small business here no matter where your operations are located.
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