California, a sunny state with a population of 41 million US citizens  makes it one of the most attractive places to start a business. California has some of America's largest agricultural land, cultural institutions and national parks, it is no wonder this is a popular state to live in.

Corporations are one of the safest entities to start as a business owner as it protects and limits their liability. In this article we explain what a corporation is and a step-by-step guide on how to start a corporation in California.

What is a Corporation?

A corporation is a type of legal entity registered by the Secretary of State. Business owners opt for this type of entity because they are seen as separate from their owners. Business owners are protected in their liability as well as their personal assets are not in jeopardy if the corporation gets sued. A corporation on its own can be sued, be taxed and make a profit. If shareholders or owners die, resign or divorce the Corporation will live on.

Corporations are best suited for medium to high risk companies that want to go public or will be sold. Having a corporation can be advantageous in cases where capital has to be raised as they can raise funds through the sale of stock. Corporations are taxed when the corporation makes a profit as well as when dividends are paid to the shareholders on their personal income tax.

How to Start a Corporation in California

Step 1: Create a name for the Corporation

There are three steps when naming a corporation.

First one would know what the California name requirements are. The requirement for naming a corporation in California is; the name must contain the word or abbreviation of “corporation”, “company”, “incorporated” or “limited”. The name has to be distinguishable from any other existing business in the state. The name cannot contain words like “bank” or “trust” without permission from the Commissioner of Business Oversight. The name may not include any words that can be confused with government entities like “FBI”.

Secondly, search the name with the Secretary of State. Check the name availability on the California Secretary of State's website.Thirdly, check and secure a domain name. TRUiC has a step-by-step guide on registering domain names and which hosting companies to use.

Step 2: Choose a California Service of Process Agent

When filling  the California Articles of Incorporation it will be required to name or nominate a California service of process agent. This is more commonly known as a registered agent. A registered agent accepts legal and official documents on behalf of the corporation. TRUiC provides a detailed guide on how to choose the best registered agent services for a company.

Step 3: Choose the Corporations Initial Directors

An initial director has to be chosen until the first shareholders meeting is held and the operations of the corporations are discussed and decided. The directors are responsible for the amendment, adoption and repeal of the operating laws. Directors also supervise, elect and remove officers.

Step 4: Issue Stock

Stock has to be issued to stakeholders for their capital contributions. Capital contributions can be property, money or services. In California corporations do not need a par value for their stock. Par value is the lowest amount that stock may be sold for. Certificates of stock can be issued to share-or stakeholders.

Step 4: File the California Articles of Incorporation

File the California Articles of Incorporation form with the Secretary of State.this form shows the basic information of the corporation like the corporation name and principal address, the corporation's service of process agent name and address, the number of authorized shares the company may issue and the incorporator's name and address. The filing fee is $100 and filing can be done through the mail or personal delivery of the documents to the Secretary of State.