Setting up and operating a California corporation.
June 16, 2015
A corporation is a legal entity used by many businesses in California. It is owned by its shareholders and managed by a board of directors who set policy and appoint individuals to manage the day-to-day affairs. Most corporations pay taxes on earnings. Shareholders also pay individual income taxes on dividends received. One of the major advantages of a corporation is protection from personal liability for its shareholders.
A California business that wants to incorporate must file Articles of Incorporation with the Secretary of State’s office and pay certain fees. Corporations can be structured as profit or non-profit. An example of a non-profit corporation might be a religious organization. Although out-of-state entities can register a corporation in California, additional steps are required to do so. In addition to other forms required, foreign corporations must furnish evidence certifying the corporation is in good standing with the state wherein it was originally incorporated.
A corporation must file appropriate documentation with the Secretary of State whenever a change is made in the business structure or if the name of the corporation changes. Upon dissolution of the corporation, the Secretary of State must be notified to remove the corporation from its records. Specific forms are available for each of these events.
Choosing the best legal structure for a business requires expertise in several areas, including business organization and tax law. Whether a business should be structured as a corporation, a partnership or an LLC will depend on the goals of the organization, taking into account liability issues and taxes. Entrepreneurs engaged in a business startup may want to use the services of a business and commercial law attorney to help them decide on the best legal structure and file any necessary legal documents.