How to File an S Corporation in California

By Michelle Kaminsky, J.D.

How to File an S Corporation in California

By Michelle Kaminsky, J.D.

You can form a corporation in California by registering with the state's Secretary of State, but California does not specifically recognize "S corporations."

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Instead, “S corporation" is an IRS tax status that may offer income tax advantages to small businesses. Once California has established your corporation, you may look into whether your company qualifies as an S corporation with the IRS.

Here are six steps to forming an S corporation in California:

Step 1: Choose a name.

You can search the California Business Search database to confirm that your chosen name is not in use by, or too similar to the name of, another corporation. Note that your name may not be misleading to the public and may include a suffix such as "Incorporated" or “corporation" or an abbreviation of those to indicate corporate status, but isn't required to in California, unlike in other states such as New York and Delaware. The exception, however, is if you are forming a “close corporation," which is a special status for smaller corporations.

You can also request a free preliminary check of your chosen name's availability by sending a Name Availability Inquiry Letter to the California Secretary of State. Just running a check on a name doesn't give you any rights to it, though, so if you want to reserve it for 60 days, you can file a Name Reservation Request Form and pay a $10 fee either in person or by mail.

You should also check out available domain names for your website and, if you want to pursue trademark protection, search the trademark registration database of the U.S. Patent and Trademark Office.

Step 2: Appoint directors.

You must appoint at least three directors, unless your corporation will have fewer than three shareholders, in which case the number of directors must be equal to or greater than the number of shareholders.

Directors may be shareholders, and they do not have to be California residents.

Step 3: Appoint a registered agent.

California requires every corporation to have a registered agent to accept legal documents and other official communications on the corporation's behalf.

A registered agent must be a California resident with a physical street address in the state (not a post office box) and must have filed a certificate with the Secretary of State.

The corporation may not act as its own agent for service of process, but one of the directors can. You may also choose a registered agent from a list of private service companies maintained by the Secretary of State, though the list is not exhaustive.

Step 4: Draft and file Articles of Incorporation.

The Secretary of State's website has a sample form you can fill in, or, if you choose to draft your own, the Articles of Incorporation should list the corporation's legal name, street and mailing address, and purpose; the name and address of the registered agent; the name and address of the person filing the Articles of Incorporation; the names and addresses of all directors; and the number of authorized shares. For close corporations, you must list the number of shares shareholders are authorized to have.

You must file the Articles of Incorporation with the California Secretary of State, along with a filing fee of $100.

Note that your corporation will also be responsible for an annual tax of $800 to the California Franchise Tax Board.

Step 5: File a Statement of Information.

Within 90 days of filing the Articles of Incorporation link, California requires that you file a Statement of Information (SI) with the Secretary of State along with a $25 fee.

You must also file an SI “each year thereafter during the applicable filing period. The applicable filing period is the calendar month in which the Articles of Incorporation were filed and the immediately preceding five calendar months."

Step 6: Apply for S corporation status with the IRS.

You will file Form 2553 with the IRS to apply for S corporation taxation status. There is no filing fee, but there are some timing restrictions on when you can file. To qualify for S corporation status, you must meet certain legal standards, such as no more than 100 shareholders and only one class of stock.

Once your corporation is registered, you will probably also want to set up bank accounts and a corporate records binder for all of your corporation's important documents, draft bylaws that detail how your corporation will operate, hold a directors' meeting, and issue stock to shareholders, but none of these are required by California law regarding corporations.

And here is a final consideration: Depending on your particular business, you may also need a business license and be subject to California's payroll tax requirements.

    This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.