Forming Corporations in Orange County, California

A Corporation is one of the most commonly formed business entities in Orange County, California. In this business structure, the law perceives the business as a separate legal person from its owners. In other words, it has its own rights, it can file lawsuits, it can pay taxes, it can buy and sell properties and also, it can commit crimes. The biggest advantage of being a corporation is that the personal assets of its owners are protected from the legal liabilities that arise from the debts and obligations that the business may incur.

How to Incorporate a Business in California?

Incorporating a Business in Orange County

Business Incorporation in Orange County, CA

The term Incorporation refers to the process of forming a new Corporation. A business can incorporate by filing an application for charter with the state of California. These application forms filed are also referred to as Articles of Incorporation (or Certificate of Incorporation or the Corporate Charter). The Articles of Incorporation should include the purpose for forming the corporation, the names and addresses of the members of the corporation, the amount and kinds of stock that the corporation will be authorized to issue, and the right and privileges of each stockholder.

The first step you should take in order to incorporate your business in California is filing the applicable Articles of Incorporation with the Secretary of State. There are various Articles of Incorporation forms to choose from, and each has been drafted to meet the requirements of the State. You can either use the forms they provide, or have a corporate lawyer compose a statutorily compliant document for you. In California, it will cost you 100 USD for filing the Articles of Incorporation, plus an additional handling fee of 15 USD, paid over-the-counter.

The different Articles of Incorporations include:

  1. Articles of Incorporation of a General Stock Corporation (Form ARTS–GS)
  1. Articles of Incorporation of a Close Corporation (Form ARTS–CL)
  1. Articles of Incorporation of a Professional Corporation (Form ARTS–PC)
  1. Articles of Incorporation of a Nonprofit Mutual Benefit Corporation (Form ARTS–MU)
  1. Articles of Incorporation of a Nonprofit Public Benefit Corporation (Form ARTS–PB–501(c)(3))
  1. Articles of Incorporation of a Nonprofit Religious Corporation (Form ARTS–RE)
  1. Articles of Incorporation of a Common Interest Development Association (Form ARTS–CID)

It is important to remember that the documents you submit may be returned to you for correction without being filed. This usually happens when there are name issues, errors, omissions or misstatements in the submitted Articles of Incorporation. To make sure that all issues and concerns are addressed properly and that the filing is done correctly, you must consult with a corporate attorney in Orange County prior to submitting the documents to the Secretary of State.

Why Should a Business Incorporate?

There are various advantages of incorporating a business in California. The prominent advantage is that, in a corporation, shareholders are not liable for the actions of the company. Therefore, creditors cannot touch the owners’ personal assets if the corporation is unable to pay its debts and obligations.

Another advantage of being a corporation is that, unlike Sole Proprietorships and Partnerships, a corporation has unlimited life. In a Sole Proprietorship and in Partnerships, the company has to dissolve upon the death or bankruptcy of a particular owner or owners. A corporation, on the other hand, continues to exist in these situations. A Corporation will continue to operate indefinitely, until it has accomplished its objectives or has merged with another company, or if the corporation itself has gone bankrupt.

Another characteristic of a corporation that incorporators will enjoy is the transferability of the corporation’s shares. One of the main motivators for incorporating a business is to have an assurance that the ownership interest that a shareholder has invested in the company is readily sold, transferred or given away to another family member. In a Sole Proprietorship and in a Partnership, removing yourself of ownership in the company can be burdensome and costly. In the event of the slightest ownership change, properties need to be retitled, new deeds need to be drawn and many other administrative steps have to be taken.

Among the different business entities, Corporations attract more investors, and therefore are able to raise their investment capital. New investors are more attracted to corporations because of the limited liability characteristic of this business structure, and the easy transferability of their shares.

Who Plays What Roles in a Corporation?

California Business Incorporation

Corporations in Orange County, CA

In order for a Corporation to operate efficiently and effectively, there are certain roles that need to function. These roles include:

1. Board of Directors

The original Board of Directors in a Corporation is designated in the Articles of Incorporation that have been filed with the Secretary of State. It is the responsibility of the Directors to oversee the officers of the company, and to make sure that the business operates according to law, and corporate procedures. It is the legal duty of every Board Director to act in the corporation’s best interest, and not their own interests. Their other legal responsibilities included protecting the investments of all their stockholders in the corporation. The Board of Directors also has the power to appoint and to dismiss any of the corporation’s officers.

2. Stockholders

Stockholders, also known as shareholders, are those who have been granted stock by the business in exchange for their investment. Investments may be in the form of money or services done for the corporation. It is part of the stockholders’ responsibility to hold an annual meeting in order to elect the corporation’s Board of Directors. The corporation’s stockholders are not legally liable for any of the corporation’s debts and obligations.

3. Corporate Officers

The Corporate Officers are those given the responsibility of running the corporation daily. A typical set of Corporate Officers includes at least on Chief Executive Officer (CEO) and/or President, a Secretary and a Treasurer/Chief Financial Officer (CFO).

The Role of a Corporate Attorney in a Corporation

Business Attorneys in CA

Incorporation Attorneys in Orange County, California

If you want to have your business incorporated, it is wise to seek the assistance of a corporate attorney in Orange County, California. A corporate lawyer can help you with the Articles of Incorporation, starting your corporation, and can even help you throughout the existence of your business. Having a corporate lawyers contracted is very helpful in all the legal aspects of forming and running a corporation.

Corporate Records Management in Orange County, California

It is common for people to quickly say “no” when they are asked whether they want a receipt or not. But businesspeople should always ask for a receipt, regardless of what they are purchasing, especially if it is related to their business. Corporate lawyers in Orange County, California strongly advise good corporate record management to avoid problems, particularly with the IRS. Diligently collecting all receipts is part of good corporate record keeping. Learn a few tips about receipts and corporate record management by reading through this article.

1. All Receipts for Business Related Expenses Should Be Kept

This is very, very important. When tax time comes, the IRS requires that all small businesses in California have a receipt to support certain expenses made by your business. It does not matter if you are paying cash, using your credit card, or issuing a check; if you are making a purchase that is related to your business, it is imperative that you ask for a receipt.

2. Label All Your Receipts

There are lots of small businesses in Orange County, California that issue receipts with incomplete details. The only information you’ll find in many of these receipts is the amount that you paid and the date that you made the purchase. These details are not enough, and are not very helpful when you are trying to manage all of your corporate records properly. It is very important that you label your receipt with the details, such as the exact item you purchased, and for what purpose you bought it. Not only will you avoid problems when auditing comes, but you will also be able to keep track of your expenses.

3. Have All Your Receipts Scanned

There are times when the IRS might ask for documentation, and audit you up to 6 years back. It would be an issue if the receipts you’d collected from before had already faded by then. You can protect your business from any unnecessary legal problems if you have your receipts scanned. You can further back up your receipts by not only saving the file in your computer, but also by keeping a copy in a flash drive. Another cool way to have a digital copy of your receipt is to take a picture of it through your smartphone.

4. Do Not Depend on Credit Card Statements and Cancelled Checks

Credit card statements and cancelled checks are important for proper corporate record management in CA, but these are insufficient if you do not have the receipts. The IRS auditor will want to see the details of your expenses, and without receipts, you cannot adequately prove your statements.

5. Avoid Using Cash For Business Expenses

Many corporate lawyers in CA advice using cash for business expenses. Expenses made using cash are difficult to track, because cash is very easy to spend and almost always tedious to reconcile with receipts. It is more efficient to use debit cards and credit cards. Back them up by never forgetting to ask for a receipt.

Small Business Tips

Running a business is not as easy as many people may think. Having to deal with corporate records and other legal problems can be an additional burden. Make your business life easier by having a corporate attorney in Orange County, CA assist you with your company. There are various business attorneys in Orange County that are very competent, and readily able to help you in the legal aspects of your business.

Corporation Name: Tips On How To Choose a Name for your Business

Are you planning to put up a business in Orange County? Choosing a name for your company in Orange County, California is one of the most important things to do when starting a business. You must choose the company name carefully, because it is so tedious to change it later on. Moreover, the name you choose might give you an extra edge on your competitors.

The following are tips on choosing a name for your company:

1. A Company Name Must Stand Out

All businesses should strive to rise above their competitors. A common mistake made by many businesses in California when naming their company is making it sound like the names of other companies. Usually, this is because they are worried whether their business will be taken seriously by customers or not.

For a business to rise above its competitors, it should have a name that stands out. When you choose a business name, use the names of your competitors as examples of what to avoid.

2. A Company Name Should Not Have Generic Surnames

Some businesses use their owner’s full name for the corporation name. If so, make sure the family name is not generic. Only those who have a truly memorable or unique family name can get away with this. Generic surnames will not make you stand out from your competitors.

3. Do Not Use Descriptive Names for your Corporation Name

In the past, many companies used business names that were descriptive of their brand. Even corporate attorneys in California used to advice this. Although it was good advice at that time, it is not as applicable today. In fact, it may hurt your company more than it can help.

There is no need to have descriptive names these days, because there are many ways customers can figure out what you do. Customers can search you on Google, scan your QR code, or look your company up in the local phone book.

It can be a burden to think of a name that will describe everything you do at once. There are other things you can do to explain the nature of your business to your customers, particularly through your website and your business card.

4. Avoid Using Acronyms for your Business Name

These days, many corporate lawyers in CA would advise business owners to do away with acronyms for a business name. The fact it, there are already many businesses in the world that use acronyms. Stand out by avoiding them.

5. Do Not Use Faux Latin for your Company Name

A lot of people are fascinated by Latin words and that is why businesspeople like to use Latin-like words to name their corporation in California. Latin-like names (e.g. Accordis, Nutiva, Valero, Abertis and Veriton) are easy to trademark, because you can always make one up that no one has used before. But the problem is that so many companies have leaned toward using faux Latin that if you use this for naming your company, you still won’t be able to stand out.

Seek The Help of a Competent Corporate Attorney in California

Choosing a business name for your company can be tedious. You can make it easier for you by seeking the help of a corporate lawyer in Orange Company in California.

The Difference Between an S Corporation & C Corporation

S Corporations and C corporations are two of the most popular business entities when a company decides to incorporate. Once you have incorporated your business, you might want to be an S corp or a C corp. If you are choosing between the two, tax concerns are usually the major basis for making a decision.

Just like a partnership business structure, S Corporations do not pay any federal income taxes. The profits and losses of an S corp are passed through to the stockholders. These people will then report the income and losses on their personal tax return. This process is called single taxation.

C corporations, however, face double taxation. Double taxation means that the C corp pays federal income tax. All dividends paid to the stockholders are also taxed.

It is always best to have a corporate lawyer in California to assist you in deciding what business entity is most suited to your company.

Learn more of the differences between S Corps and C Corps by reading through this article:

Advantages of Being an S Corporation

A major advantage of being an S Corp is that income and losses are passed through to the shareholders of the company, and taxes are paid only once. Thus, double taxation is eliminated. It is important to check the laws and regulations of your state regarding this, because some states do not recognize S Corps and will tax the company just like a regular C corp. There are states that charge S Corps as state tax, even if the company will not have to pay federal income tax.

If your business becomes an S Corp, you as the owner are protected from liability. With S Corps, the personal assets of the owner and the shareholders are separate from the company’s assets.

Accounting is also easier with S corps, because you can simply use the cash method of accounting. It’s perfectly alright if you do not have any inventory. Moreover, with S corps you will have more room for investors. In fact, S corps can have up to 100 stockholders!

Disadvantages of Being an S Corporation

S Corps , just like other business entities, are required to file a number of official and federal documents, including the Articles of Incorporation. The company must also hold regular meeting with their stockholders, and the minutes of these meeting be filed. There are also a number of government fees that have to be met regularly.

There are also shareholder restrictions with S corps. In a C corp, shareholders are taxed only when they receive their dividends. But with S corps, the shareholders are taxed for any income that the company has, even if they have not received any portion of that income. Another restriction is that S corps shareholders are only allowed to issue one class of stack. Many investors can get discouraged by this.

Again, in order to know more about what you’re getting into when it comes to choosing a business entity for your company, it is always best to have a corporate attorney in Orange County, California to assist you.