Forming a Corporation in California

April 09, 2013 (Press-News.org) Forming a corporation in California

Article provided by George C. Rudolph, A Professional Corporation
Visit us at http://www.rudolphlawgroup.com

Individuals who are interested in establishing a business in California should know that they have several options with regard to the type of business organization they form. When starting a new business, careful consideration should be given to federal and state formation and tax requirements, ownership and succession issues, whether the form of entity shields its owners from personal liability, and the extent to which the form of entity provides a vehicle for the kind of capitalization and investments anticipated.

Once the options have been reviewed, many business owners choose to operate as a corporation. However, as with any form of entity selected, it is crucial that the owners fully understand what is involved in becoming properly incorporated, and properly running a corporation.

California corporations

In California, as in other states, a corporation is deemed to be a person that exists completely separate and apart from its owners. If the corporation is structured and operated properly, this separate existence shields the owners from personal liability for corporate actions and obligations. However, both the corporation and the shareholders have certain related tax obligations.

Also important is the fact that stock and bond sales can generate operating capital for the corporation. In appropriate cases, this allows the corporation to develop and expand without incurring potentially stifling and expensive debt. At the same time, stock and bond sales are strictly regulated; and both state and federal rules must be followed, where applicable.

Incorporating a business

One of the first steps that a business owner must take in order to incorporate a business is to select a name for the corporation. There are many rules that must be followed with regard to naming the corporation, some of which are:
-The corporation's name cannot match any other corporation's name that is already on file with the state.
-The name has to demonstrate the business' corporate status by including a word that signifies that status, such as "incorporated" or "corporation."
-The name cannot imply that it has any affiliation with the government.


Something else of which business owners should be mindful is ensuring that they do not infringe upon trademarks registered to another company or individual.

Another step that a business owner must take in order to form a California corporation is to file Articles of Incorporation with the secretary of state's office. Once the Articles have been done, corporate bylaws and shareholder agreements will need to be created.

Bylaws generally delineate how the corporation will be run with regard to important corporate decisions, who has voting rights, and how the voting rights are exercised. Shareholder agreements typically provide for the survival of the corporation in the event of the death or disability of a shareholder, or the sale of a shareholder's stock.

There are several other steps that need to be taken, and it is important that business owners know what rules to be followed in order to properly incorporate the business. If you are thinking about starting a corporation in California, consult a knowledgeable business attorney who is experienced in forming corporations in this state.