How to Form a Corporation in California: Filing, Stock, and Taxes

To form a corporation in California, you file Articles of Incorporation with the Secretary of State, pay a $100 filing fee, and complete a short sequence of follow-up steps before the entity can legally operate. The corporation becomes a legal entity separate from its owners, so business debts and lawsuits generally stay with the business. Plan for California’s $800 annual minimum franchise tax, though newly formed corporations may qualify for a first-year waiver.

Pick and Clear a Corporate Name

Your name must be distinguishable from every other entity already on file with the California Secretary of State. State naming regulations implementing California Corporations Code Section 202 block names that are too similar to one already registered.¹

The name also needs a corporate identifier. For a general stock corporation, that’s “Corporation,” “Incorporated,” or “Limited” (or the abbreviations “Corp.,” “Inc.,” or “Ltd.”). “Company” or “Co.” also works.¹

Search the Secretary of State’s online business database before you commit. A name that clears the state can still collide with a federal trademark, so a check of the U.S. Patent and Trademark Office database is worth a few minutes. Finding a conflict after you’ve printed cards and signed a lease is expensive.

Name a Registered Agent for Service of Process

Every California corporation must designate an agent to receive lawsuits and formal government notices on its behalf. California Corporations Code Section 1502 requires this both in the initial Statement of Information and in every annual filing after that.²

An individual agent must live in California and list a physical street address. A P.O. box does not qualify. You can instead hire a registered corporate agent, a company authorized by the state to accept service for other entities. Many founders use a professional agent to keep a home address off the public record and to ensure someone is available during business hours.²

Prepare the Articles of Incorporation

The Articles of Incorporation is the document that brings the corporation into existence. California’s standard form for a general stock corporation is Form ARTS-GS, available on the Secretary of State’s website. The form asks for:

The full corporate name with its identifier
A purpose statement (most corporations use the general-purpose language: “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.”)
The name and California street address of the agent for service of process, or the name of a registered corporate agent
The corporation’s physical California street address, plus a mailing address if different
The total number of shares the corporation is authorized to issue

The share authorization number is the one strategic decision on the form. Many startups authorize a large number of shares (10 million is common for tech companies planning to seek venture capital) while only issuing a fraction at formation. Authorizing more shares up front leaves room to bring on co-founders, grant employee equity, and raise capital without amending the Articles later. California does not charge more for authorizing additional shares at formation.

The incorporator signs under penalty of perjury. The incorporator does not need to be a director or shareholder; anyone can serve in this role. Initial directors are not listed on the ARTS-GS form itself; they’re identified in the bylaws or at the organizational meeting.

File the Articles and Pay the Fee

You can file through the Secretary of State’s bizfile Online portal or mail a paper copy to Sacramento. Online filings generally process within a few business days; mailed filings can take several weeks. The standard filing fee for a general stock corporation is $100.³

If you need faster processing, the Secretary of State offers in-person expedited service at the Sacramento office, in addition to the $100 filing fee:

Same-day service: $750 (documents must arrive by 9:30 a.m.)
4-hour service: $500 (requires prior preclearance approval)
24-hour service: $350

These are add-ons to the $100 filing fee.⁴

Once the state processes the filing, you receive a file-stamped copy of the Articles. That stamped copy is your proof the corporation legally exists, and you’ll need it to open bank accounts, apply for an EIN, and set up vendor accounts. A certificate of status confirming good standing is available for an additional fee if a lender or partner asks.

Get an Employer Identification Number

Once the state recognizes the corporation, apply to the IRS for an Employer Identification Number. An EIN functions as the business’s tax ID and is required to open a corporate bank account, file tax returns, and hire employees.⁵

The IRS issues EINs at no cost through an online application. The process takes about 15 minutes, and the number is issued immediately upon approval. Form the corporation with the state first: applying before the Articles are filed can delay processing.⁶

The online session cannot be saved and times out after 15 minutes of inactivity, so have your Articles and agent details in front of you before starting. Print the confirmation letter when it appears; it’s your official EIN assignment notice.

Adopt Bylaws and Hold the Organizational Meeting

Bylaws are the corporation’s internal rulebook. California Corporations Code Section 211 authorizes the board of directors or the shareholders to adopt bylaws, and every corporation needs them in place before conducting business.⁷

At a minimum, bylaws should address:

Director structure: the number of directors, how they’re elected, and how vacancies are filled
Officer roles: California requires at least a chairperson of the board or president, a secretary, and a chief financial officer, and one person can hold multiple officer positions in a small corporation⁸
Meeting procedures: rules for calling and running board and shareholder meetings, quorum, and voting thresholds
Fiscal year: the accounting period for tax reporting

After the bylaws are drafted, the initial board holds an organizational meeting. Minutes should document adoption of the bylaws, appointment of officers, authorization to open bank accounts, and approval of any stock issuances to founders. These records are never filed with the state, but they’re the foundation of corporate formalities and the kind of documentation courts examine when someone challenges the separation between owner and corporation.

Keeping the Liability Shield Intact

The point of incorporating is the liability shield, and it only holds up if you actually treat the corporation as a separate entity. When owners pay personal expenses from the corporate account, skip board meetings, or make handshake deals instead of documented resolutions, courts can pierce the corporate veil and reach owners personally. Keeping a dedicated corporate bank account, documenting major decisions in writing, and holding at least annual board meetings costs almost nothing and preserves the protection you incorporated to get.

Issue Stock to the Founders

A corporation has no shareholders until it issues stock. After the organizational meeting authorizes issuance, you have to comply with both federal and California securities laws, even when the only buyers are the founders themselves.

Federally, the Securities Act of 1933 requires registration of all securities offerings unless an exemption applies. For most new corporations issuing stock to a small founder group, Rule 506(b) of Regulation D is the common exemption. It allows sales to an unlimited number of accredited investors with no dollar cap and no SEC registration.⁹

California adds its own layer. The Corporate Securities Law of 1968 requires that securities offered or sold in California be either qualified with the Department of Financial Protection and Innovation or covered by a specific exemption.¹⁰ California Corporations Code Section 25102 lists transaction exemptions, including offers to a limited number of purchasers and certain employee benefit plans. Most founder stock issuances fit under one of these exemptions, but the specific requirements depend on the number of recipients and the transaction.

Once the securities work is done, issue stock certificates (or record book entries for uncertificated shares), update the stock ledger, and collect the consideration from each shareholder, whether cash, property, or services.

File the Initial Statement of Information Within 90 Days

Within 90 days of the filing date on your Articles, submit a Statement of Information on Form SI-550. This is a separate requirement under California Corporations Code Section 1502, and missing the deadline triggers a $250 penalty and can lead to suspension by the Secretary of State.²

The form asks for the names and addresses of current directors and officers, the corporation’s principal address, the agent for service of process, and a description of the business activity. The filing fee is $25, submitted through the same bizfile Online portal.

After that initial filing, corporations must file a new Statement of Information annually during a six-month filing window tied to the month of incorporation. Put it on the calendar. The state does not send reminders, and a lapsed filing can lead to suspension even if all taxes are current.

Plan for the $800 Franchise Tax

California imposes a minimum annual franchise tax of $800 on every corporation, whether or not the business earns revenue. Profitable corporations pay the greater of the $800 minimum or 8.84% of net income.¹¹

The $800 minimum is due in the first quarter of each tax year, and the Franchise Tax Board requires payment whether the corporation is active or dormant. One break for new businesses: the FTB waives the minimum franchise tax for a newly formed corporation filing its initial return for its first taxable year.¹² After that first year, the $800 hits every year the corporation exists, which is why dissolving a corporation you no longer use matters.

Electing S-Corporation Tax Status

By default, the IRS treats a new corporation as a C corporation: the entity pays corporate income tax, and shareholders pay tax again on distributions. Many small business owners elect S-corporation status to pass income and losses through to shareholders’ personal returns instead.

To make the election, file IRS Form 2553 no later than two months and 15 days after the beginning of the tax year the election should take effect. For a new corporation, that clock starts on the earliest of the date the corporation first had shareholders, first had assets, or began doing business.¹³

Not every corporation qualifies. S corporations are capped at 100 shareholders, can have only one class of stock, and cannot have non-resident alien shareholders or corporate shareholders. Corporations planning to raise venture capital usually can’t use S-corp status because typical VC fund structures cannot hold S-corp stock. In California, S corporations still owe the $800 minimum franchise tax, plus a 1.5% state income tax on net income, so the state-level savings are real but smaller than the federal savings.

Other Recurring Obligations

Beyond the franchise tax and annual Statement of Information, expect a few standing tasks. The corporation files federal returns each year (Form 1120 for C corps, Form 1120-S for S corps) and California returns (Form 100 or 100S) with the Franchise Tax Board. If the corporation has employees, it owes federal payroll taxes including Social Security (6.2%), Medicare (1.45%), and federal unemployment tax, along with California state payroll taxes administered by the Employment Development Department. Most California cities and counties also require a local business license or tax certificate, with fees varying by jurisdiction.

1
California Secretary of State. Business Entity Name Regulations and Additional Statutory Requirements and Restrictions
2
California Legislative Information. California Corporations Code 1502
3
California Secretary of State. Business Entities Fee Schedule
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California Secretary of State. Business Entities Fee Schedule – Section: Preclearance and Expedited Filing Services
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Internal Revenue Service. Employer Identification Number
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Internal Revenue Service. Get an Employer Identification Number
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California Legislative Information. California Corporations Code 211
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California Legislative Information. California Corporations Code 312
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U.S. Securities and Exchange Commission. Frequently Asked Questions About Exempt Offerings
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Department of Financial Protection and Innovation. Securities – DFPI
11
Franchise Tax Board. Business Tax Rates
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Franchise Tax Board. S Corporations
13
Internal Revenue Service. Instructions for Form 2553