How to Form a California Corporation

Step 3: File articles of incorporation

Now it’s time to complete and file your articles of incorporation with the California Secretary of State. Find the appropriate form on the Secretary of State’s website, then file online and pay the $100 filing fee. Provide all the required information, including the following: 

• Your corporation name. Be sure to include any required designators like “Corp.” or “Inc.” Your name should also match what you reserved or cleared when running a California business name search.
• Your purpose statement. You’ll likely need to include a general purpose clause such as, “The purpose of the corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business, or the practice of a profession permitted to be incorporated by the California Corporations Code.”
• The agent for service of process. Include the name and California street address of your registered agent. The address must be their physical address. Using a P.O. box could lead to your application being rejected.
• Additional articles if needed. Most corporations don’t need additional articles beyond the four required sections. Only add supplemental articles if you need specific provisions like preemptive rights, director liability limitations, or special voting requirements.
• The total number of authorized shares. List the total number of shares authorized for issuance. If there will be multiple classes of stock, you’ll need to add these designations to your articles. 
• Incorporator signatures. The form must be signed by one or more incorporators (the people forming the corporation). Type the incorporators’ names clearly and include a handwritten signature. Unsigned forms are immediately rejected.

Step 4: Create bylaws and appoint directors

Next, draft corporate bylaws, which govern internal operations. Bylaws can also contain other rules for the operation of the company, including the way officers and directors are selected, their duties, and the way meetings are to be called and conducted.

The requirements for incorporation bylaws in the state of California are as follows:

• A California corporation is required to keep bylaws at its principal place of business in California. They are not filed with the Secretary of State.
• The bylaws must either specify the number of directors or set a minimum and maximum number of directors and state that the exact number will be decided by the board or the shareholders.
• Bylaws cannot include anything that is illegal or that conflicts with the articles of incorporation.

You’ll also need to appoint initial directors according to California requirements:

• A California corporation with three or more shareholders must have at least three directors. If a corporation has only one shareholder, it can have one or more directors. If a corporation has only two shareholders, it can have two or more directors.
• California does not specify any eligibility requirements for directors.

Step 5: Hold an organizational meeting

Once the California Secretary of State approves your articles of incorporation, it’s official: Your business legally exists, but you still have several important steps to complete. You need to hold your first board of directors meeting to adopt bylaws, appoint officers, and issue stock certificates to shareholders. Make sure to document all actions in corporate minutes.

Step 6: Obtain an EIN and open a business bank account

Apply for a federal employer identification number (EIN) with the IRS or with LegalZoom’s EIN service. You’ll need an EIN to hire employees or open a corporate bank account, which is necessary for separating corporate finances from personal accounts.

Step 7: File initial statement of information

Within 90 days of incorporation, you must submit an initial statement of information (California’s name for an annual report) and pay the $25 filing fee. The statement of information provides current information about directors, officers, and the registered agent. Learn more about how to file this form and subsequent reporting requirements. 

To file this form, you’ll need the complete names and California street addresses (no P.O. boxes) of all corporate officers, including the CEO, secretary, CFO, and any other officers. You must list all directors with their complete addresses, the registered agent’s information, the corporation’s principal business address in California, and a brief description of your business type or activities.

Step 8: Register for state and local taxes

Finally, you’ll need to create an account with the California Franchise Tax Board. It’s important to have a clear understanding of your tax obligations, including whether you owe corporate income tax (for C corp), sales tax, and/or franchise tax.

Every corporation that is incorporated, registered, or doing business in California must pay the $800 minimum franchise tax. Check with your county or city to determine if there are any additional business taxes. You may also wish to enlist the help of a CPA or financial advisor.

This is also when you’ll need to obtain any necessary state and local business licenses. Get a round-up of all the permits or licenses you’ll need when you use LegalZoom’s business license service.

Costs and taxes for a California corporation

Here’s what to know about the potential costs and expected taxes when forming a California corporation.

State filing fees

• Articles of incorporation: $100
• Name reservation: $10 (optional)
• Initial statement of information: $25

Other common costs

• Registered agent service: $100–$300 annually if hiring a professional service
• Legal and professional fees: Varies based on complexity and professional assistance needed
• Business licenses: Varies by business type and location
• Corporate supplies: Corporate seal, stock certificates, minute book

California franchise tax overview

All California corporations must pay a minimum franchise tax of $800 annually, due even if the corporation has no income.

First-year exemption: On or after January 1, 2020, newly incorporated or qualified corporations are not required to pay the minimum franchise tax in their first taxable year.

Short tax year exception: Corporations are also not subject to the minimum tax if both of the following are true: (1) they did not conduct any business in California during the tax year, and (2) their tax year was 15 days or fewer.

Optional S corporation election

California corporations can elect S corporation status for tax purposes if they meet specific eligibility requirements detailed by the IRS. To elect S corp tax status, file federal Form 2553 with the IRS. 

S corporations pay a 1.5% tax on their net income or $800, whichever is greater.

Ongoing compliance: Statement of information and annual obligations

California corporations have several recurring compliance requirements to maintain good standing.

Statement of information

• Initial filing: Within 90 days of incorporation
• Annual updates: Every year, following this schedule
• Filing fee: $25 per filing
• Late penalties: $250 late fee

Annual meetings and minutes

California corporations should:

• Hold annual shareholder meetings
• Conduct regular board of directors meetings
• Maintain detailed minutes of all meetings
• Keep corporate records at the principal place of business in California

Franchise tax due dates

• Annual return and minimum payment due: By the 15th day of the 4th month after the close of the tax year
• Extension available: Corporations filing after the original due date are granted an automatic 7-month extension, and S corporations filing after the original due date are granted an automatic 6-month extension.
• Important: An extension to file is not an extension to pay. You must pay your estimated tax by the original due date to avoid interest and penalties. Use FTB Form 3539 to make estimated payments for an extension.
• Suspended corporations: The Franchise Tax Board does not grant automatic extensions to file for suspended corporations.

Agent for service of process maintenance

• Ensure your registered agent information remains current
• Update the statement of information if your registered agent changes
• Never allow your corporation to be without a registered agent

How to keep a California corporation in good standing

To maintain good standing with the California Secretary of State, you must pay consistent attention to annual filings, tax obligations, corporate formalities, and record-keeping obligations. Corporations that fall out of good standing face suspension, lose the ability to defend lawsuits in California courts, and risk personal liability for officers and directors. This section provides a practical compliance calendar and minimum viable recordkeeping system to help you stay compliant with California's ongoing corporate requirements.

Your California corporation compliance calendar

There are a few key dates that you’ll need to keep in mind when keeping your business in compliance.

• Immediately after incorporation: File Form SI-550 (Statement of Information) within 90 days of your articles of incorporation filing date. Obtain your EIN from the IRS. Hold your organizational meeting and adopt bylaws. Issue initial stock certificates and document the issuance in your stock ledger.
• By the 15th day of the 4th month after incorporation: File your first California tax return (Form 100 or 100S) and pay any required tax by the original due date (an extension to file is not an extension to pay). If you are subject to the $800 minimum franchise tax, it generally applies to corporations incorporated, registered, or doing business in California, with a first-year minimum tax exemption for corporations newly incorporated or qualified on or after January 1, 2020.
• Annually, by March 15 (for calendar-year corporations): File federal corporate tax return (Form 1120 or 1120-S if you elected S corporation status). Deadlines vary if you use a fiscal year instead of a calendar year.
• Annually, by the 15th day of the 4th month after your tax year ends: File California corporate tax return (Form 100 or 100S) and pay any required tax by the due date.
• Annually, during your assigned filing period: File Form SI-550 (Statement of Information) with the Secretary of State. Your filing period is based on the month you incorporated. The Secretary of State will mail a notice approximately four months before your deadline, but don't rely solely on this notice—keep track of the deadline yourself.
• At least annually: Hold and document an annual meeting of shareholders and a meeting of the board of directors. California law requires at least one shareholder meeting per year along with regular board meetings to maintain corporate formality.

Meeting minutes and corporate formalities

California corporations must hold regular meetings and maintain written minutes to preserve their limited liability protection. At minimum, hold an annual shareholders' meeting to elect directors and address major corporate decisions, and hold board meetings at least annually (quarterly is a better practice) to approve significant actions, review financials, and document major decisions. Document every meeting with written minutes that include the date, attendees, matters discussed, and actions taken. Store these minutes in your corporate records book.

Critical actions that require board approval and documentation include: Issuing or transferring stock, approving contracts over a certain threshold, authorizing loans or lines of credit, amending bylaws, electing officers, declaring dividends, and approving major purchases or leases. Even if you're the sole shareholder and director, hold these meetings and document them formally—courts can pierce the corporate veil if you fail to maintain corporate formalities.

Essential recordkeeping requirements

California law requires corporations to maintain specific records at their principal office or registered agent's office. Your corporate records book must include: the Articles of Incorporation and any amendments, bylaws and any amendments, minutes of all shareholder and board meetings, written consents in lieu of meetings, a stock ledger showing all stock issuances and transfers, and records of all accounting and financial statements.

Keep these records organized and accessible—shareholders have the right to inspect certain corporate records, and you'll need them for tax filings, audits, and any legal proceedings. Store physical documents in a secure binder or file system, and maintain digital backups of all critical records. Many corporations use a corporate records book or kit that includes stock certificates, a corporate seal, and pre-formatted minute forms.

Maintaining your registered agent and business addresses

Your registered agent and principal business address must remain current with the Secretary of State at all times. If you change your registered agent, file a Statement of Change of Agent (Form ARTS-CH-100) immediately—there's no fee for this filing. If your business address changes, update it on your next annual Statement of Information filing, or file an interim update if the change is significant. Failing to maintain a valid registered agent can result in suspension and means you won't receive important legal notices.

What happens if you fall out of good standing

The California Franchise Tax Board and Secretary of State can suspend or forfeit your corporation for failure to file tax returns, pay the franchise tax, or file the statement of information. A suspended corporation loses the right to use California courts to enforce contracts, cannot defend lawsuits effectively, and may expose officers and directors to personal liability. To revive a suspended corporation, you must file all delinquent tax returns, pay all outstanding taxes and penalties, and file any missing Statements of Information. The revival process can take months and cost thousands in back taxes and penalties, making prevention far more cost-effective than cure.

How LegalZoom can help you create a corporation in California

There can be a lot on your plate when forming a new business, from submitting the right documents to creating your internal bylaws and more. LegalZoom can help you incorporate your business, guiding you with step-by-step guidance and kickstarting your company in minutes. Use our business formation service to start your new venture today.